The "REAL AMERICA Act" proposes several changes to the Internal Revenue Code, primarily aimed at providing tax relief for workers and altering the taxation of investment management income. One key provision establishes a new deduction for cash tips received during the taxable year, provided they are reported to the employer. Similarly, the bill introduces a deduction for qualified overtime compensation , defined as overtime paid in excess of the regular rate as required by the Fair Labor Standards Act. Both of these new deductions are subject to a modified adjusted gross income (MAGI) limitation of $450,000 for individuals and $900,000 for joint filers, and they can be claimed by non-itemizers. Another significant change is the repeal of the inclusion of Social Security benefits in gross income for taxable years beginning after December 31, 2025. To ensure the financial stability of Social Security and Railroad Retirement trust funds, the bill mandates appropriations from the Treasury to offset any revenue reduction caused by this repeal. This provision aims to prevent any negative impact on the solvency of these critical programs. The bill also enacts substantial reforms to the taxation of "carried interest," which refers to profits interests received by partners providing investment management services. It introduces a new Section 710 to the Internal Revenue Code, which generally treats net capital gain from an "investment services partnership interest" as ordinary income. This recharacterization also applies to gains on the disposition of such interests and ensures that dividends from these interests are not treated as qualified dividend income. The existing carried interest provision, Section 1061, is simultaneously repealed. An "investment services partnership interest" is defined as an interest in an "investment partnership" acquired for services like advising or managing assets. However, an exception exists for "qualified capital interests," where actual capital contributions are taxed based on their capital nature if allocations are made comparably to non-service providers. The legislation also extends the recharacterization rules to other "disqualified interests" whose value is tied to asset performance. To enforce these changes, the bill imposes a 40 percent penalty on underpayments resulting from the avoidance of these new carried interest rules, with stricter conditions for the reasonable cause exception. Furthermore, income and loss from these investment services partnership interests are included in net earnings from self-employment for individuals providing such services, expanding the tax base for Social Security and Medicare. The bill also modifies Section 751 to treat investment services partnership interests as ordinary income assets upon certain transactions. For publicly traded partnerships, "specified carried interest income" is explicitly excluded from qualifying income, which could impact their ability to maintain partnership tax status, though a 10-year transitional rule is provided for this specific change.