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To amend the Internal Revenue Code of 1986 to establish deductions for cash tips, repeal the inclusion of social security benefits in gross income, and for other purposes.
4/4/2025, 8:06 AM
Summary of Bill HR 2621
One key aspect of the bill is the introduction of deductions for cash tips. This would allow individuals who receive tips in cash, such as restaurant servers or bartenders, to deduct these tips from their taxable income. This would provide these workers with a tax benefit and help ensure that they are accurately reporting their income.
Additionally, the bill seeks to repeal the inclusion of social security benefits in gross income. Currently, social security benefits are subject to taxation if an individual's income exceeds a certain threshold. This bill would eliminate this requirement, providing relief to individuals who rely on social security as a source of income. Overall, Bill 119 HR 2621 aims to provide tax relief to individuals who rely on tips as part of their income and to simplify the tax code by repealing the inclusion of social security benefits in gross income. The bill is currently under consideration in Congress and may undergo further revisions before potentially becoming law.
Congressional Summary of HR 2621
Reward Each American’s Labor And Make Every Rich Individual Contribute Again Act or the REAL AMERICA Act
This bill establishes new federal tax deductions for cash tips and qualified overtime compensation, excludes Social Security and Tier I railroad retirement benefits from gross income for federal tax purposes, and modifies the taxation of carried interest.
The bill allows individuals with a modified adjusted gross income (MAGI) of $450,000 or less ($900,000 or less for joint filers) to claim a federal tax deduction for (1) cash tips, and (2) qualified overtime compensation.
The bill excludes all Social Security and Tier I railroad retirement benefits from gross income. (Currently, a portion of such benefits is included in gross income, depending on the beneficiary’s MAGI.)
Under the bill, net capital gain and loss attributable to carried interest is recharacterized as ordinary and, thus, taxed at ordinary income tax rates. (Carried interest is currently taxed at capital gains tax rates, which may be lower than applicable ordinary income tax rates. Carried interest is the share of profits received by the general partner in a private equity firm or hedge fund from the assets managed by that general partner.)
The bill also
- treats as ordinary the money (or fair market value of property) received by a partner in a sale or exchange of carried interest,
- requires distributions of carried interest by a partnership in exchange for interest in other partnership property to be recognized ordinary gain, and
- imposes self-employment taxes on carried interest income.
