No Tax on Tips & Overtime by State 2026
The federal OBBBA "no tax on tips" and "no tax on overtime" deductions do not automatically apply to your state return — as of August 2026, 25 of the 42 income-taxing states (including DC) still tax at least some tips or overtime income that's fully deductible on your federal return. 8 states conform to both deductions with no cap, and 9 states' current status is unclear — see the full table below and confirm your state before filing.
Want your federal savings first? Run your numbers through the tips or overtime deduction calculators.
Four outcomes, at a glance
25 states (incl. DC) tax at least some tips or overtime income that's federal-deductible — you must add it back on the state return.
8 states fully conform to both deductions — mostly states whose income tax already starts from federal taxable income.
9 states' current status could not be confirmed with a reliable source — verify directly with that state's tax department.
9 states have no broad-based income tax, so the conformity question doesn't arise — your tips and overtime were never state-taxed.
All 50 states + DC
"Tips" and "overtime" are shown separately because a state can conform to one deduction and not the other — Colorado and New York are the clearest examples. Hover or read the note column for the mechanism (rolling vs. static IRC conformity, effective tax year, caps, or pending legislation) and click through to the source.
| State | Tips (§224) | Overtime (§225) | Notes & source |
|---|---|---|---|
| Alabama | Unclear | Taxes it | Overtime: Alabama had its own pre-OBBBA state overtime tax exemption (unrelated to the federal deduction) that expired June 30, 2025 — overtime is fully state-taxable again regardless of the federal Schedule 1-A deduction. Tips: no independent confirmation found beyond a single conformity tracker. [Alabama Dept. of Revenue (overtime exemption sunset); Tax1099 conformity tracker (tips, unverified)] |
| Alaska | No income tax | No income tax | No broad-based state income tax on wages — the federal tips/overtime deduction question doesn't arise because there's no state income tax base to deduct from. [No state income tax] |
| Arizona | Conforms | Conforms | Allowed for TY2025 via Gov. Hobbs's Executive Order 2025-15 (Nov. 2025) directing the Dept. of Revenue to update forms; codified by HB 4168, signed June 13, 2026, effective July 1, 2026. [Arizona Governor's Office — Executive Order 2025-15] |
| Arkansas | Taxes it | Taxes it | Arkansas computes state taxable income on its own separate base rather than starting from federal AGI or taxable income, so new federal deductions don't flow through automatically. A conforming bill (HB1822, the "Overtime but not Overtaxed Act") died in committee. Sourced only to a single third-party conformity tracker (Tax1099), not a state DOR bulletin or bill text — treated as lower-confidence than officially-sourced rows above. [Tax1099 OBBBA State Conformity Tracker] |
| California | Taxes it | Taxes it | California's IRC conformity date is fixed at January 1, 2015 — a decade before OBBBA — so the new federal deductions don't apply for state purposes without separate legislation. State leadership cited an estimated $3.2 billion annual revenue cost as the reason not to pursue conformity; add both amounts back on the CA return. [Thomson Reuters — Which states are decoupling from federal tax provisions?] |
| Colorado | Conforms | Taxes it | Colorado conforms to the tips deduction. Overtime relief was allowed for tax year 2025 only — SB26-056 limits the overtime addback exemption to TY2025, so for TY2026 onward Colorado requires the addback (i.e., overtime is state-taxable again from 2026). [Colorado General Assembly — SB26-056] |
| Connecticut | Taxes it | Taxes it | Connecticut has not conformed to either deduction. House Bill 5010 (proposed 2026 session) would eliminate state tax on tips and overtime — DRS estimates a $200M/year cost — but has not been enacted; add both back on the CT return until it is. [Thomson Reuters — state decoupling tracker; CT Mirror on HB 5010] |
| Delaware | Unclear | Unclear | No state DOR guidance or independent confirmation found beyond a single conformity tracker; Delaware conforms to federal AGI (not taxable income), which is the mechanism that has caused several other AGI-conformity states to be mislabeled "conforming" by that tracker. Verify directly with Delaware Division of Revenue before relying on this. Sourced only to a single third-party conformity tracker (Tax1099), not a state DOR bulletin or bill text — treated as lower-confidence than officially-sourced rows above. [Tax1099 OBBBA State Conformity Tracker (unverified)] |
| District of Columbia | Taxes it | Taxes it | The DC Council passed legislation decoupling from both federal deductions. Status is contested: DC officials say Congress's constitutional review-period override of that decoupling law was untimely and therefore invalid, while the override — if it stands — would mean DC's default conformity to the federal deduction remains in effect. We report DC's own operative position (decoupled/non-conforming) but flag this as a live legal dispute, not a settled fact. [ITEP — Linking to Tipped and Overtime Income Deductions Would Worsen State Shortfalls] |
| Florida | No income tax | No income tax | No broad-based state income tax on wages — the federal tips/overtime deduction question doesn't arise because there's no state income tax base to deduct from. [No state income tax] |
| Georgia | Partial | Partial | HB 463 exempts only up to $1,750 of qualified overtime AND up to $1,750 of cash tips per year (2026–2028, not TY2025) — well below the federal caps ($12,500 single / $25,000 MFJ overtime; $25,000 tips). Income above Georgia's own $1,750 cap remains state-taxable even though it's federal-deductible in full. [BDO — Georgia enacts important SALT bills] |
| Hawaii | Taxes it | Taxes it | Hawaii's IRC conformity date is fixed at December 31, 2024 — before OBBBA was enacted. No 2026 conforming legislation was found; both deductions require an addback on the Hawaii return. [Hawaii Employers Council — Federal tip and overtime tax changes under OBBBA] |
| Idaho | Conforms | Conforms | Idaho computes state taxable income starting from federal taxable income (post-deduction) rather than federal AGI — one of a handful of states where new federal below-the-line deductions like these flow through automatically under rolling conformity. [ITEP — Linking to Tipped and Overtime Income Deductions Would Worsen State Shortfalls] |
| Illinois | Taxes it | Taxes it | Illinois requires an addback (via Schedule M) for both federally-exempt tips and overtime income — confirmed by multiple independent sources, including the state's own subtraction/addback modification rules. The flat 4.95% Illinois rate applies to both. [University of Illinois Tax School — OBBBA Update: Qualified Tips and Overtime Compensation] |
| Indiana | Conforms | Conforms | Indiana taxed tips and overtime income in 2025 but enacted legislation to allow both federal deductions starting with tax year 2026 — so 2025 Indiana returns still owe state tax on this income, but 2026 returns onward do not. [ITEP State Tax Watch 2026] |
| Iowa | Conforms | Conforms | Iowa computes state taxable income starting from federal taxable income, so both new federal deductions flow through automatically under rolling conformity — no separate Iowa legislation was needed. [ITEP — Linking to Tipped and Overtime Income Deductions Would Worsen State Shortfalls] |
| Kansas | Taxes it | Taxes it | Kansas starts its income tax calculation from federal AGI, not federal taxable income — the OBBBA tips/overtime deductions apply below the AGI line, so they don't reduce Kansas income unless Kansas separately adopts a matching state deduction, which it has not. [Mechanism analysis — Kansas AGI-based conformity (no separate KS deduction enacted)] |
| Kentucky | Taxes it | Taxes it | Kentucky's IRC conformity date is fixed at December 31, 2023 — over 18 months before OBBBA was enacted, so the new deductions are not picked up without separate legislation. Sourced only to a single third-party conformity tracker (Tax1099), not a state DOR bulletin or bill text — treated as lower-confidence than officially-sourced rows above. [Tax1099 OBBBA State Conformity Tracker] |
| Louisiana | Unclear | Unclear | No independent confirmation found beyond a single conformity tracker; Louisiana conforms to federal AGI, the same mechanism that caused mislabeling elsewhere. Verify directly with Louisiana Dept. of Revenue before relying on this. Sourced only to a single third-party conformity tracker (Tax1099), not a state DOR bulletin or bill text — treated as lower-confidence than officially-sourced rows above. [Tax1099 OBBBA State Conformity Tracker (unverified)] |
| Maine | Taxes it | Taxes it | Gov. Janet Mills directed the state tax assessor not to conform to either federal deduction; Maine's IRC conformity date is fixed at December 31, 2024, before OBBBA. [ITEP — Linking to Tipped and Overtime Income Deductions Would Worsen State Shortfalls] |
| Maryland | Unclear | Unclear | Maryland's Comptroller confirmed in a January 2026 Tax Alert that the federal overtime deduction "does not flow through" for tax year 2025 (addback required). Maryland otherwise has rolling AGI conformity and is reported to potentially resume automatic conformity from TY2026 absent further legislative action to permanently decouple — a genuinely unresolved status as of this writing. Verify current-year status directly with the Comptroller before relying on this. [Maryland Comptroller — Tax Alert on OBBBA conformity (via BDO)] |
| Massachusetts | Taxes it | Taxes it | Massachusetts DOR's working-draft Technical Information Release (Oct. 21, 2025) confirms the state does not adopt IRC §224 (tips) or §225 (overtime) — both require an addback on the Massachusetts return. [CBIZ, citing Massachusetts DOR draft TIR] |
| Michigan | Conforms | Conforms | Michigan actively enacted legislation (Public Act) to connect to both federal deductions starting tax year 2026 — unlike the automatic-flow-through states, this was a deliberate legislative choice; 2025 Michigan returns still owe state tax on this income. [ITEP — Linking to Tipped and Overtime Income Deductions Would Worsen State Shortfalls] |
| Minnesota | Taxes it | Taxes it | Gov. Walz's 2026 tax proposal did not include conformity to either deduction, and matching subtraction bills (HF3524/HF3525) had not been enacted as of the most recent reporting found. Re-verify before publication in case a later bill passed. [Minnesota Budget Project — A first look at Governor Walz's 2026 tax proposal] |
| Mississippi | Taxes it | Taxes it | Mississippi uses a selective/separate-base conformity mechanism that does not automatically pick up new federal deductions. Sourced only to a single third-party conformity tracker (Tax1099), not a state DOR bulletin or bill text — treated as lower-confidence than officially-sourced rows above. [Tax1099 OBBBA State Conformity Tracker] |
| Missouri | Unclear | Unclear | No independent confirmation found beyond a single conformity tracker; Missouri conforms to federal AGI, the same mechanism that caused mislabeling elsewhere. Verify directly with the Missouri Dept. of Revenue before relying on this. Sourced only to a single third-party conformity tracker (Tax1099), not a state DOR bulletin or bill text — treated as lower-confidence than officially-sourced rows above. [Tax1099 OBBBA State Conformity Tracker (unverified)] |
| Montana | Conforms | Conforms | Montana computes state taxable income starting from federal taxable income; the Dept. of Revenue confirmed automatic flow-through of both deductions with no new state form lines needed. [Thomson Reuters — Implementing OBBBA tax law changes] |
| Nebraska | Unclear | Unclear | No independent confirmation found beyond a single conformity tracker; Nebraska conforms to federal AGI, the same mechanism that caused mislabeling elsewhere. Verify directly with the Nebraska Dept. of Revenue before relying on this. Sourced only to a single third-party conformity tracker (Tax1099), not a state DOR bulletin or bill text — treated as lower-confidence than officially-sourced rows above. [Tax1099 OBBBA State Conformity Tracker (unverified)] |
| Nevada | No income tax | No income tax | No broad-based state income tax on wages — the federal tips/overtime deduction question doesn't arise because there's no state income tax base to deduct from. [No state income tax] |
| New Hampshire | No income tax | No income tax | New Hampshire taxes only interest and dividend income (a 4% Interest & Dividends Tax, itself being phased out) — wages, tips, and overtime are not subject to New Hampshire income tax at all, so this is not a conformity question. [No state income tax] |
| New Jersey | Taxes it | Taxes it | Official New Jersey Division of Taxation guidance states: "federal deductions under the federal OBBBA regarding overtime, tips, and senior citizens do not affect a taxpayer's New Jersey Individual Income Tax return." New Jersey defines its own income categories rather than starting from federal AGI or taxable income. [New Jersey Division of Taxation — OBBBA guidance (official)] |
| New Mexico | Unclear | Unclear | No independent confirmation found beyond a single conformity tracker; verify directly with the New Mexico Taxation and Revenue Department before relying on this. Sourced only to a single third-party conformity tracker (Tax1099), not a state DOR bulletin or bill text — treated as lower-confidence than officially-sourced rows above. [Tax1099 OBBBA State Conformity Tracker (unverified)] |
| New York | Conforms | Taxes it | Tips: New York required an addback for TY2025, but the enacted FY2027 state budget (signed May 28, 2026) added a New York-specific tips subtraction modification (up to $25,000, Tax Law §612) effective for tax years beginning on or after January 1, 2026 — so 2025 NY returns still owe state tax on tips, 2026 returns onward do not. Overtime: no matching New York legislation was enacted — the governor's budget proposal covered tips only, so overtime premium pay remains fully New York-taxable in both 2025 and 2026. [New York Division of the Budget — FY2027 Enacted Budget] |
| North Carolina | Taxes it | Taxes it | House Bill 11, which would create a state deduction for overtime, tips, and bonus pay, had not passed as of the most recent reporting found — North Carolina requires an addback on both until it does. [Carolina Journal — Federal, state tax changes to hit NC taxpayers in 2026] |
| North Dakota | Conforms | Conforms | North Dakota computes state taxable income starting from federal taxable income, so both deductions flow through automatically under rolling conformity. [ITEP — Linking to Tipped and Overtime Income Deductions Would Worsen State Shortfalls] |
| Ohio | Taxes it | Taxes it | Ohio's IRC conformity date is fixed at March 7, 2025 — about four months before OBBBA was enacted. A bill to update Ohio's conformity date (SB 9) was pending but not enacted as of the most recent reporting found. [Tax1099 OBBBA State Conformity Tracker (corroborated by conformity-date mechanism)] |
| Oklahoma | Unclear | Unclear | No independent confirmation found beyond a single conformity tracker; verify directly with the Oklahoma Tax Commission before relying on this. Sourced only to a single third-party conformity tracker (Tax1099), not a state DOR bulletin or bill text — treated as lower-confidence than officially-sourced rows above. [Tax1099 OBBBA State Conformity Tracker (unverified)] |
| Oregon | Conforms | Conforms | Oregon computes state taxable income starting from federal taxable income, so both deductions flow through automatically under rolling conformity (Oregon's treatment of other OBBBA items, like the senior bonus deduction, differs — this row covers tips/overtime only). [ITEP — Linking to Tipped and Overtime Income Deductions Would Worsen State Shortfalls] |
| Pennsylvania | Taxes it | Taxes it | Pennsylvania computes taxable wages under its own independent definition rather than starting from federal AGI or taxable income, so the new federal deductions can't flow through regardless of Pennsylvania's general conformity posture. [Mechanism analysis — Pennsylvania's independent wage-tax base (corroborated by Tax1099 tracker)] |
| Rhode Island | Taxes it | Taxes it | Rhode Island's Division of Taxation confirmed in official guidance (Oct. 2, 2025) that Rhode Island does not follow the federal deductions — decoupling was enacted in the state's FY2026 budget (effective June 30, 2025); tips and overtime remain fully RI-taxable wages. [Rhode Island Division of Taxation — official guidance (PDF)] |
| South Carolina | Taxes it | Taxes it | South Carolina's tax base is otherwise structurally linked to federal taxable income, but conformity requires an annual legislative update the state did not make for OBBBA: the state Senate voted 16–27 on March 31, 2026 to reject the conformity bill after the House had passed it unanimously and Senate Finance advanced it 17–2. [SC Daily Gazette — SC Senate rejects plan to use OBBBA tax breaks] |
| South Dakota | No income tax | No income tax | No broad-based state income tax on wages — the federal tips/overtime deduction question doesn't arise because there's no state income tax base to deduct from. [No state income tax] |
| Tennessee | No income tax | No income tax | No broad-based state income tax on wages — the federal tips/overtime deduction question doesn't arise because there's no state income tax base to deduct from. [No state income tax] |
| Texas | No income tax | No income tax | No broad-based state income tax on wages — the federal tips/overtime deduction question doesn't arise because there's no state income tax base to deduct from. [No state income tax] |
| Utah | Unclear | Unclear | No independent confirmation found beyond a single conformity tracker; Utah's 2026 legislative session covered a general income tax rate cut but no specific tips/overtime conformity bill was found. Verify directly with the Utah State Tax Commission before relying on this. Sourced only to a single third-party conformity tracker (Tax1099), not a state DOR bulletin or bill text — treated as lower-confidence than officially-sourced rows above. [Tax1099 OBBBA State Conformity Tracker (unverified)] |
| Vermont | Taxes it | Taxes it | Vermont's IRC conformity date is fixed at January 1, 2024 — before OBBBA was enacted. Sourced only to a single third-party conformity tracker (Tax1099), not a state DOR bulletin or bill text — treated as lower-confidence than officially-sourced rows above. [Tax1099 OBBBA State Conformity Tracker] |
| Virginia | Unclear | Unclear | Conflicting sources: HB 29 (signed Feb. 20, 2026) reverted Virginia to static IRC conformity fixed at December 31, 2025, and Virginia Tax Bulletin 26-1 reportedly "strategically decouples from specific provisions of OBBBA" — but a third-party tracker independently lists Virginia as fully conforming on tips/overtime, and we could not confirm which provisions Bulletin 26-1 actually decouples from. Genuinely unresolved — verify directly against Bulletin 26-1 before relying on this. [Carry.com — Virginia static tax conformity / OBBBA decoupling (conflicts with Tax1099 tracker)] |
| Washington | No income tax | No income tax | No broad-based state income tax on wages — the federal tips/overtime deduction question doesn't arise because there's no state income tax base to deduct from. [No state income tax] |
| West Virginia | Taxes it | Taxes it | West Virginia's IRC conformity date is fixed at December 31, 2024 — before OBBBA was enacted. Sourced only to a single third-party conformity tracker (Tax1099), not a state DOR bulletin or bill text — treated as lower-confidence than officially-sourced rows above. [Tax1099 OBBBA State Conformity Tracker] |
| Wisconsin | Taxes it | Taxes it | Gov. Evers vetoed SB 36 (tips exemption) and AB 461 (overtime deduction) on April 3, 2026, objecting to "ceding control over the direction of state tax policy to Congress." Both remain fully Wisconsin-taxable. [Wisconsin Examiner — Evers vetoes GOP bills for no tax on overtime and tips] |
| Wyoming | No income tax | No income tax | No broad-based state income tax on wages — the federal tips/overtime deduction question doesn't arise because there's no state income tax base to deduct from. [No state income tax] |
A note on how we verified this
State conformity to OBBBA's tips and overtime deductions is unusually volatile — several states finalized their position only in Q1-Q2 2026 legislative sessions, and status can differ by tax year (2025 vs. 2026) within the same state. We prioritized official state Department of Revenue guidance and enacted bill text where we could find it (New Jersey, Massachusetts, Rhode Island, Wisconsin, South Carolina, New York, Colorado, Georgia, Arizona), and cross-checked broader trackers against those primary sources. One widely-cited third-party tracker was found to mislabel several federal-AGI-conformity states (Illinois, Connecticut, Kansas, and New York's overtime provision) as "conforming" when official guidance says otherwise — states sourced only to that tracker are flagged "unclear" rather than reported as conforming. If your state shows "unclear" or you're making a filing decision based on this page, confirm directly with your state's Department of Revenue.
Mixed and partial conformity — read the fine print
- Georgia caps its own tips AND overtime exemptions at $1,750/year each (2026-2028) — far below the federal $25,000 tips cap and $12,500/$25,000 overtime cap. Anything above Georgia's own cap is still state-taxable even though it's fully federal-deductible.
- Colorado conforms to the tips deduction, but its overtime relief applied only for tax year 2025 — the addback returns starting with 2026 returns.
- New York required an addback for 2025 tips, but conforms starting with tax year 2026 returns (up to $25,000, Tax Law §612). New York has not conformed to the overtime deduction at all.
- Indiana and Michigan taxed both tips and overtime for 2025 but conform starting with 2026 returns.
- DC's status is legally contested: the DC Council passed decoupling legislation, but DC officials dispute whether Congress's review-period override of that law was timely — we report DC's own stated position (non-conforming) while flagging the dispute.
Frequently asked questions
Does the federal no-tax-on-tips deduction automatically apply to my state return?
No. The OBBBA qualified tips deduction (IRC §224) and qualified overtime deduction (IRC §225) are federal-only — they reduce your federal taxable income via new Schedule 1-A, not automatically your state taxable income. Whether your state also excludes this income depends entirely on that state's own conformity choice. As of August 2026, 25 of the 42 states (and DC) that levy an income tax currently tax at least some tips or overtime income that's federal-deductible.
Which states fully conform to both the tips and overtime deductions?
Idaho, Iowa, Montana, North Dakota, and Oregon conform automatically because their income tax starts from federal taxable income rather than federal AGI. Arizona conforms via executive order and enacted legislation. Indiana and Michigan conform starting with tax year 2026 (their 2025 returns still owe state tax on this income).
Why do California, New York, and Illinois still tax tips and overtime?
California's IRC conformity date is fixed at January 1, 2015 — a decade before OBBBA — and state leadership cited an estimated $3.2 billion annual cost as the reason not to update it. Illinois explicitly opted out and requires an addback on Schedule M. New York taxes overtime (no matching legislation was enacted) but does conform to the tips deduction starting tax year 2026, after requiring an addback for 2025.
What does it mean when a state "conforms" or "doesn't conform"?
States generally start their own income tax calculation from a federal figure — either federal adjusted gross income (AGI) or federal taxable income. A state with "rolling" conformity to federal taxable income tends to pick up new federal deductions like these automatically. A state with "static" conformity (pegged to a fixed date before OBBBA was enacted), one that starts from federal AGI instead of taxable income, or one that computes wages under its own independent rules, generally does NOT get the new deduction unless it passes its own separate law — meaning you "add back" the tip or overtime income that's federal-tax-free when you calculate your state return.
Is this page up to date?
State conformity to OBBBA is an actively evolving area — legislative sessions were still passing bills on this topic well into 2026. This table was last verified August 2026 against state Department of Revenue guidance, enacted bill text, and independent tax-policy reporting where available. 9 states' status could not be confirmed with a reliable source and are marked "unclear" rather than guessed — always confirm your specific state's current position before filing.
Sources
- IRS: How to take advantage of no tax on tips and overtime
- IRS Notice 2025-69 — Guidance for Individual Taxpayers on Qualified Tips and Qualified Overtime
- ITEP — A Year Later, Many States Have Decided Not to Double Down on Trump's Tax Cuts (state conformity tracker, secondary source)
- ITEP — Linking to Tipped and Overtime Income Deductions Would Worsen State Shortfalls (secondary source)
- AP wire (via nxsmediawire) — Many states don't follow Trump's tax breaks for tips and overtime (secondary source)
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