RICHMOND, Va. (AP) — Gov. Glenn Youngkin has unveiled a budget proposal to exempt service tips from Virginia’s state income tax, a move that could put an estimated $70 million back into the hands of workers annually.
The proposal, which Youngkin announced Monday, is part of his administration’s broader effort to reduce the cost of living for families across the Commonwealth. Since taking office, Youngkin has championed more than $5 billion in tax relief for Virginians.
“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,” Youngkin said. “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 Virginia Department of Taxation and the Virginia Employment Commission estimate that more than 250,000 workers in the food service, personal service, and hospitality industries would benefit from the proposed tax relief. This includes servers, hair stylists, bellhops, concierges, and other tip-based workers.
Under the plan, Virginians who earn tips would be allowed to deduct that income on their state tax return if it is already reported as part of their federal adjusted gross income. The state Department of Taxation would use IRS data and employer-reported W-2 forms to ensure compliance.
Youngkin emphasized that Virginia’s strong financial position—including record employment levels, budget surpluses, and a AAA bond rating—enables the state to implement this measure while maintaining fiscal responsibility and sustaining investments in public services.
The proposal will be part of Youngkin’s upcoming budget submission to the General Assembly, which convenes in January.
