Governor Youngkin introduces plan to exempt service tips from Virginia income tax to support workers
Richmond, Virginia – Governor Glenn Youngkin has introduced a budget proposal earlier this week aimed at exempting service tips from Virginia’s state income tax, a measure expected to return approximately $70 million annually to hardworking residents. This initiative is part of the Governor’s ongoing effort to reduce the cost of living and provide financial relief to working families across the Commonwealth. It builds upon more than $5 billion in tax relief already achieved under his administration.
Boosting Take-Home Pay for Workers
“We have delivered over $5 billion in tax relief to date, and we remain committed to lowering the cost of living for hardworking Virginians. It’s their money, not the government’s,” said Governor Youngkin. “By removing tips from taxable income, it will directly increase the take-home pay of hundreds of thousands of Virginians and give them more buying power, which in turn will improve financial stability, stimulate local economies, and honor the value of their hard work.”
The proposal is expected to benefit more than 250,000 Virginians, particularly those working in industries such as food service, hospitality, and personal services. Hair stylists, bellhops, concierges, and other workers who rely on tips as part of their income will see tangible benefits. Workers in other industries where tipping is common will also qualify for the exemption.
How the Tax Relief Works
Under the plan, Virginians earning tips will be allowed to claim a deduction on their state tax return, as long as the tip income is included in their federal adjusted gross income. The Virginia Department of Taxation, in collaboration with employer-reported W-2 data and IRS information, will ensure compliance with the exemption guidelines.
Fiscal Responsibility and Economic Impact
Virginia’s strong financial position, marked by record employment, rising revenues, significant budget surpluses, robust reserves, and a AAA bond rating, makes this tax relief proposal feasible. It allows the state to deliver meaningful financial benefits to its residents without compromising fiscal responsibility or essential public services.
By putting more money back into the hands of workers, the Governor’s proposal aims to improve financial stability, stimulate local economies, and reward the hard work of Virginians. If implemented, this initiative will further underscore the Commonwealth’s commitment to supporting its workforce while maintaining sound fiscal management.
