New York State Cuts Income Tax on Tips up to $25,000

Governor Kathy Hochul announced that New York will eliminate the state income‑tax levy on the first $25,000 of tipped earnings for workers in restaurants, bars, hotels and other service sectors. The measure is expected to return roughly $67 million to the pockets of thousands of employees, increasing disposable income for families that rely on tips.

The state change mirrors the federal provision in the “One Big Beautiful Bill” (HR 1), which creates a similar deduction for tipped income from 2025 through 2028. Eligible workers include both employees and self‑employed individuals in occupations the IRS designates as tip‑eligible, provided tips are voluntary and paid in cash or electronic form. Mandatory service charges are excluded, and the deduction applies whether filers use a Social Security Number or an ITIN.