Tip income exempted from individual income tax and tax withholding requirements.

HF 1221 exempts reported tip income from Minnesota's individual income tax and employer tax withholding requirements. The bill adds a new definition to state tax law specifying that "tips" include amounts workers report to employers under federal tax rules (IRC 6053(a)) or to the IRS as taxable wages (IRC 3121(q)). This means tipped workers, such as restaurant servers, will no longer have their reported tips counted toward their taxable income for Minnesota state taxes, and employers will not need to withhold state income tax on those amounts. The change takes effect for tax years beginning after December 31, 2024.