What does Preamble of REAL AMERICA Act do?

This bill, formally titled '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,' aims to modify the Internal Revenue Code of 1986. The bill proposes to establish deductions for cash tips. The bill seeks to repeal the inclusion of social security benefits in gross income.

What does SHORT TITLE; ETC. of REAL AMERICA Act do?

This Act is formally titled the "Reward Each American's Labor And Make Every Rich Individual Contribute Again Act" or the "REAL AMERICA Act". Amendments or repeals within this Act refer to sections or provisions of the Internal Revenue Code of 1986 unless otherwise specified.

What does DEDUCTION FOR CASH TIPS. of REAL AMERICA Act do?

This section amends Part VII of Subchapter B of Chapter 1 to create a new deduction for cash tips. The deduction amount is equal to cash tips received during the taxable year, included on statements furnished to the employer. The deduction is limited to taxpayers with a modified adjusted gross income (MAGI) not exceeding $450,000 ($900,000 for joint returns). For this purpose, 'modified adjusted gross income' is defined as adjusted gross income increased by certain exclusions. Section 63(b) is amended to allow the deduction for cash tips to non-itemizers. The Secretary of the Treasury is required to modify withholding tables and procedures to account for the new deduction. The amendments apply to taxable years beginning after December 31, 2025.

What does REPEAL OF INCLUSION OF SOCIAL SECURITY BENEFITS IN GROSS of REAL AMERICA Act do?

Section 86 of the Internal Revenue Code of 1986 is amended to include a new subsection (g). This new subsection (g) terminates the application of the amended section 86 after December 31, 2025. Funds under the Social Security Act and the Railroad Retirement Act of 1974 are held harmless. An appropriation is established to offset reductions in transfers to these funds resulting from the amendment to section 86.

What does DEDUCTION FOR QUALIFIED OVERTIME COMPENSATION. of REAL AMERICA Act do?

This section establishes a new deduction for qualified overtime compensation. The deduction amount is equal to the qualified overtime compensation received during the taxable year. The deduction is limited to taxpayers with a modified adjusted gross income not exceeding $450,000 (or $900,000 for joint returns). Modified adjusted gross income is defined as adjusted gross income increased by certain exclusions. Qualified overtime compensation is defined as overtime compensation paid under the Fair Labor Standards Act of 1938, exceeding the regular rate. Non-itemizers are also eligible for the deduction. Employers are required to include the total amount of qualified overtime compensation on Form W-2. The Secretary of the Treasury must modify withholding tables to account for the new deduction. The amendments apply to taxable years beginning after December 31, 2025.

What does PARTNERSHIP INTERESTS TRANSFERRED IN CONNECTION WITH of REAL AMERICA Act do?

This section modifies section 83 of the Internal Revenue Code regarding the election to include partnership interest in gross income. It adds a new paragraph (4) to subsection (c) of section 83, specifically addressing transfers of partnership interests in connection with the provision of services to a partnership. The fair market value of a transferred partnership interest is treated as the amount a partner would receive in a liquidation of the partnership's assets. The recipient of the interest is treated as having made an election under subsection (b)(1) unless they specifically elect otherwise. The election under subparagraph (A)(ii) will follow rules similar to those in subsection (b)(2). These amendments apply to partnership interests transferred after the enactment of this Act.

What does SPECIAL RULES FOR PARTNERS PROVIDING INVESTMENT MANAGEMENT of REAL AMERICA Act do?

This section amends subchapter K of chapter 1 of the Internal Revenue Code by adding a new section, 710, establishing special rules for partners providing investment management services to partnerships. For investment services partnership interests, amounts equal to the net capital gain are treated as ordinary income, and net capital losses are treated as ordinary losses, subject to limitations. The recharacterization of losses is limited to recharacterized gains from preceding partnership taxable years. Gains and losses on the disposition of an investment services partnership interest are generally treated as ordinary income or loss. Certain dividends and gains from qualified small business stock are not treated as qualified dividend income or subject to section 1202, respectively. Section 1402 of the Internal Revenue Code is amended to include investment services partnership income or loss in determining net earnings from self-employment. Section 702(a) is amended to include amounts treated as ordinary income or loss under section 710 in partner accounting.

Back to bills

REAL AMERICA Act

Last updated: 4/3/2025 · Introduced: 4/3/2025

Author: Steve Cohen (D-TN)

TL;DR (AI)

This bill establishes new tax deductions for cash tips and qualified overtime compensation, both capped at an adjusted gross income of $450,000 (or $900,000 for joint filers), allowing non-itemizers to claim these deductions.
The bill repeals the taxation of Social Security benefits, while establishing an appropriation to offset any resulting reductions in transfers to the Social Security and Railroad Retirement Acts.
The bill modifies tax rules related to partnership interests, specifically addressing transfers of interests in exchange for services and establishing special rules for partners providing investment management services, which may recharacterize capital gains and losses as ordinary income or loss.

119th Congressin committeeHR. 1091(In Committee)Official page

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