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Ten States Let the Federal Tip Deduction Cut 2026 State Tax, and Twelve Have Said No
For tax year 2026, 10 of the 41 states that tax wages let the federal tip deduction lower state tax, and 8 do the same for overtime. Georgia and Alabama wrote smaller deductions of their own. Twelve states have said in writing that tips stay taxable, and seventeen have published no answer we could find.
The four deductions come from the 2025 federal law: up to $25,000 of qualified tips, up to $12,500 of overtime premium ($25,000 joint), up to $10,000 of interest on a loan for a new US-assembled car, and $6,000 for each filer 65 or older, under §§224, 225, 163(h)(4) and 151(d)(5). Each one phases out with income, and each one is claimed in the same place.
Why a state does not pick them up by default
All four sit on Schedule 1-A, and the schedule does not touch adjusted gross income. The IRS's instructions say the schedule reports "additional deductions that can't be entered directly on Form 1040", that the total on line 38 is entered on Form 1040 line 13b, and that the deductions are available "whether you claim the standard deduction or itemize." The schedule itself computes its income limits from line 11b, which is AGI. Line 13b comes after AGI is final.
That placement sorts the states into three mechanisms.
- A state that starts from federal AGI never sees line 13b. The deduction reaches the state return only if the legislature writes a state subtraction for it.
- A state that starts from federal taxable income (line 15) inherits line 13b automatically, but only if its conformity to the Internal Revenue Code is rolling or its fixed conformity date falls on or after July 4, 2025, the day the law was signed. Such a state can still add a deduction back.
- A state with its own income base, such as New Jersey or Pennsylvania, follows none of it unless it legislates.
The same federal deduction can therefore be worth a full state deduction, a capped one, or nothing, depending only on where the state's form begins.
The 24 states that have answered
"Not yet determined" means we found no statute or revenue-department statement for 2026 on that deduction. It is not a no. Rate-table status in the last column is from the 2026 table status page.
| State | Tips | Overtime | Car-loan interest | Senior $6,000 | Mechanism and authority | 2026 table |
|---|---|---|---|---|---|---|
| Alabama | No | Own: up to $1,000 | Yes, if itemizing | No | AGI start; ALDOR summary, Nov 2025; car loan on Schedule A line 11; HB 527 overtime deduction | provisional |
| Arizona | Yes | Yes | No (2025 only) | Yes | Laws 2026 ch. 140 subtractions | final |
| California | No | No | No | No | FTB: does not conform; IRC date Jan 1, 2025 | provisional |
| Colorado | Yes | No | Not yet determined | Not yet determined | Federal taxable income start; overtime added back from 2026 | provisional |
| Delaware | No | No | No | Not yet determined | Will not flow through to an AGI-based return | final |
| Georgia | Own: up to $1,750 | Own: up to $1,750 | Not yet determined | Not yet determined | DOR 2026 income tax changes | final |
| Hawaii | Not yet determined | No | No | No | Act 35 of 2026 lists §§225, 151 and 163(h)(4) as inoperative | final |
| Idaho | Yes | Yes | Yes | Yes | HB 559 full conformity; Tax Commission | provisional |
| Indiana | Yes | Yes | Yes | Not yet determined | IC 6-3-2-31 to -33, 2026 only | final |
| Iowa | Yes | Yes | Yes | Yes | Federal taxable income, rolling | provisional |
| Kentucky | No | No | No | Not yet determined | KRS 141.019(2)(k) to (m), 2026 Acts ch. 161 | final |
| Maryland | No | No | No | No | Comptroller: no effect on FAGI | provisional |
| Massachusetts | No | No | No | Not yet determined | TIR 26-4 | provisional |
| Michigan | Yes | Yes | Not yet determined | Not yet determined | Own subtraction, 2026 to 2028 | provisional |
| Montana | Yes | Yes | Yes | Yes | Federal taxable income start | final |
| New Jersey | No | No | Not yet determined | No | Own gross income base | provisional |
| New York | Yes, up to $25,000 | Not yet determined | Not yet determined | Not yet determined | Tax Law §612(c)(48) | final |
| North Carolina | No | No | No | No | NCDOR on S.L. 2026-31 | final |
| North Dakota | Yes | Yes | Yes | Yes | Perpetual conformity to federal taxable income | final |
| Oregon | Yes | Yes | No | No | OR-17 subtractions; SB 1507 | final |
| Pennsylvania | No | No | No | No | Revenue: no counterpart | final |
| South Carolina | No | No | No | No | IRC as of Dec 31, 2024; 2026 update failed | final |
| Utah | No | No | No | No | Tax Commission, Jan 2026 | final |
| Wisconsin | No | No | No | No | DOR, Nov 2025 | final |
Three of the "No" rows rest on statements published before the 2026 legislative sessions: Alabama's tip and senior answers (November 2025), Utah's (January 2026) and Wisconsin's (November 2025). We found nothing later that changed them, and the table dates them so a reader can check.
Not yet determined on all four, because we found no 2026 statute or agency statement: Arkansas, Connecticut, Illinois, Kansas, Louisiana, Maine, Minnesota, Mississippi, Missouri, Nebraska, New Mexico, Ohio, Oklahoma, Rhode Island, Vermont, Virginia and West Virginia. A starting line is not a published answer, so none of them is counted as a no.
The nine states without a tax on wages (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming) have nothing to conform.
How four states drew the line
Colorado begins its return at federal line 15, after line 13b has already come off. Its Department of Revenue requires one addback: for tax years 2026 and later the Department of Revenue says filers add back "the full amount of the federal deduction claimed" for overtime on Schedule 1-A, and states that "no addback is required" for qualified tips. The guide names no addback for car-loan interest or the senior deduction, and says nothing affirmative about either, so the table leaves both undetermined.
Oregon went the other way on the car. Its 2025 guide lists subtractions for tips, overtime and vehicle-loan interest, and excepts the §151 senior deduction from its rolling tie to federal taxable income. SB 1507, Oregon Laws 2026 chapter 142, disconnects the vehicle-loan interest deduction for tax years starting January 1, 2026, so an Oregon car buyer who deducted interest on a 2025 return loses it on the 2026 one.
Arizona did the same by date rather than by repeal. Its June 2026 law subtracts tips and overtime for taxable years beginning after December 31, 2024 and keeps the senior deduction, but writes the car-loan subtraction "from and after December 31, 2024 through December 31, 2025." One year, then gone.
Kentucky moved its Code date forward to December 31, 2025 and, in the same act, listed §224, §225 and §163(h)(4) by number among the federal deductions excepted from Kentucky net income. The bill became law over a partial veto; the legislative record shows it delivered to the Secretary of State on April 14, 2026.
What it is worth on a state return
TaxMath's persona P1 is a single filer with $65,000 of wages and the standard deduction. As a server, $15,000 of that is tips; as a warehouse worker, $3,000 of it is the overtime premium. Where a state deduction removes the whole amount from state taxable income, it is worth the difference between the state's tax on $65,000 and its tax on the lower figure, from our 2026 tables:
| State | P1 server, $15,000 tips | P1 warehouse worker, $3,000 OT premium |
|---|---|---|
| Oregon | $1,313 | $263 |
| New York | $810 | Not yet determined |
| Idaho | $795 | $159 |
| Montana | $718 | $154 |
| Colorado | $660 | $0 (added back) |
| Michigan | $637 | $128 |
| Iowa | $570 | $114 |
| Indiana | $443 | $89 |
| Arizona | $375 | $75 |
| Georgia ($1,750 cap) | $87 | $87 |
| Alabama ($1,000 overtime cap) | $0 | $50 |
The same $15,000 of tips is worth $1,313 in Oregon and $87 in Georgia, because Georgia stops at $1,750. Alabama's overtime deduction is worth $50 to the warehouse worker; a full $3,000 subtraction would have been worth $150 under the same Alabama rates.
A row whose state table is marked provisional in the first table's last column moves if that table does. The federal deduction on Schedule 1-A is the same in every row; only the state's choice of starting line, and what its legislature did about it, changes.
In Indiana that choice has an end date already written: IC 6-3-2-31 through 6-3-2-33 apply to the 2026 tax year only, so the server who saves $443 on a 2026 Indiana return has no Indiana tip deduction in the statute for 2027.
Sources
Ordered by authority — the law and the agencies administering it first. Every link is checked for rot; see all sources.
- Primary lawLaws 2026, Chapter 140 (HB 4168): Internal Revenue Code conformityArizona State Legislature · published 2026-06-13 · checked 2026-10-21Amends A.R.S. 43-1022 to subtract the §224 tip and §225 overtime deductions and the §151(d)(5)(C) senior deduction for taxable years beginning after December 31, 2024; the §163(h)(4) vehicle-loan interest subtraction runs only through December 31, 2025. Signed June 13, 2026.Other articles citing this source
- Primary lawHB 2329 CD1, Relating to Conformity of the Hawaii Income Tax Law to the Internal Revenue Code (Act 35, 2026)Hawaii State Legislature · checked 2026-10-21Moves Hawaii's IRC date to December 31, 2025 for taxable years beginning after December 31, 2025, and lists as not operative §225 (qualified overtime), §151 (personal exemptions) and §163(h)(4) (qualified passenger vehicle loan interest). §224 is not on the inoperative list.Other articles citing this source
- Primary lawHB 757 (2026 Regular Session), enrolled textKentucky General Assembly · checked 2026-10-21Sets Kentucky's IRC date at December 31, 2025 for tax years beginning on or after January 1, 2026, and amends KRS 141.019(2) so that the deductions allowed by §224 (qualified tips), §225 (qualified overtime) and §163(h)(4) (qualified passenger vehicle loan interest) are excepted from Kentucky net income.Other articles citing this source
- Primary lawNew York Tax Law §612 — New York adjusted gross income of a resident individualNew York State Senate · checked 2026-10-20Subsection (a): New York AGI is federal AGI with the section’s modifications — the starting line that below-the-line federal deductions such as Schedule 1-A never reach unless a modification carries them in. §612(c)(48) does so for tips alone: for taxable years beginning on or after January 1, 2026 it subtracts up to $25,000 "to the extent allowed as a federal deduction pursuant to section two hundred twenty-four"; the section has no counterpart for §225 overtime. Among the modifications: §612(b)(8) adds back federal §168(k) special depreciation (recovered as recomputed depreciation through §612(c)(16)), and §612(b)(36) adds back the §179 deduction on a sport utility vehicle for taxpayers other than eligible farmers.Other articles citing this source
- Primary lawOne Big Beautiful Bill Act, Public Law 119-21U.S. Government Publishing Office · published 2025-07-04 · checked 2026-10-20The Act as enacted — controlling text for every OBBB provision described on this site.Other articles citing this source
- GovernmentOBBBA Frequently Asked QuestionsAlabama Department of Revenue · checked 2026-10-21States that qualified passenger vehicle loan interest may be taken on Form 40 or 40NR Schedule A, Itemized Deductions, line 11, with the phase-out computed on Alabama AGI.Other articles citing this source
- GovernmentOne Big Beautiful Bill Act: Executive Summary of Alabama Impacts (updated November 10, 2025)Alabama Department of Revenue · published 2025-11-10 · checked 2026-10-21Provision-by-provision table: qualified tips, qualified overtime and the §151(d)(5) senior deduction marked "Tied to Federal: No"; qualified passenger vehicle loan interest marked "Yes", through Alabama's itemized interest deduction.Other articles citing this source
- GovernmentSummary of Federal Income Tax ChangesCalifornia Franchise Tax Board · checked 2026-10-21For Public Law 119-21, states that California does not conform to §70201 (tips), §70202 (overtime) or §70203 (passenger vehicle loan interest), and does not conform to the §70103 senior deduction; California's specified conformity date is January 1, 2025.Other articles citing this source
- GovernmentIndividual Income Tax GuideColorado Department of Revenue, Taxation Division · checked 2026-09-01States that Colorado income tax is based on federal taxable income, modified by the additions and subtractions of Part 3 — which order the federal overtime compensation deduction added back for tax years 2026 and later, state that no addback is required for qualified tips, and name no addback for car-loan interest, so the §163(h)(4) deduction rides the federal-taxable-income base into the Colorado return.Other articles citing this source
- GovernmentTax Alert: Maryland Impacts of the One Big Beautiful Bill ActComptroller of Maryland · published 2026-01-06 · checked 2026-10-21For tax years 2025 through 2028, the tips, overtime, auto-loan interest and §151(d)(5)(C) senior deductions do not affect Maryland tax liability and are not reported on the Maryland return, because they do not change federal adjusted gross income.Other articles citing this source
- GovernmentTax Season UpdatesDelaware Division of Revenue · checked 2026-10-21States that the OBBBA deductions for tips, overtime and car loan interest are not defined federally as itemized deductions and will not flow through to the Delaware personal income tax, which conforms to federal AGI.Other articles citing this source
- GovernmentImportant tax updatesGeorgia Department of Revenue · checked 2026-09-01The Department’s own statement of the current figures: “The Georgia income tax rate has been reduced to a flat rate of 4.99%” and a standard deduction increased to $15,000 for single taxpayers, heads of households, and married taxpayers filing separately, or $30,000 filing jointly.Other articles citing this source
- GovernmentLatest update on filing 2025 Idaho income taxesIdaho State Tax Commission · published 2026-03-13 · checked 2026-10-21After HB 559 took effect, lists the federal deductions Idaho now follows, including the enhanced senior deduction and the deductions for tips, car loan interest and overtime.Other articles citing this source
- GovernmentInformation Bulletin #128: Indiana Conformity to the Internal Revenue CodeIndiana Department of Revenue · checked 2026-10-21States that the 2026 General Assembly enacted IC 6-3-2-31, 6-3-2-32 and 6-3-2-33, creating Indiana deductions for tips, overtime compensation and qualified passenger vehicle loan interest, in place only for the 2026 tax year.Other articles citing this source
- GovernmentInstructions for Form 1040 and 1040-SR (2025), including the Instructions for Schedule 1-AInternal Revenue Service · checked 2026-10-21Schedule 1-A instructions (pp. 101–110): line 4a from W-2 box 7 or Forms 4070, the box 5 over $176,100 caution, the one-employer and multiple-employer tip worksheets, line 5 net income limitation, the overtime methods (employer statement, total overtime pay ÷ 3, double-time fractions, reasonable method), line 14a for overtime deferred out of box 1, line 22 VIN columns, the valid-SSN definition (valid for employment, issued before the due date including extensions), and the reached-65-the-day-before-the-birthday rule. Also the 2025 standard deduction chart ($33,100 joint, one spouse 65+) and the Tax Computation Worksheet (Section B: 22% less $10,172.00 for $100,000–$206,700).Other articles citing this source
- GovernmentSchedule 1-A (Form 1040), Additional Deductions (2025)Internal Revenue Service · checked 2026-09-01The schedule as printed. Part V (lines 31–37) works the seniors phase-out — line 32 prints the $75,000/$150,000 thresholds, line 35 the reduced per-person figure entered on 36a and 36b — and Part VI line 38 carries the total to Form 1040 line 13b.Other articles citing this source
- GovernmentImpact of the One Big Beautiful Bill Act on Employee WithholdingIowa Department of Revenue · checked 2026-10-21States that Iowa taxable income starts from federal taxable income under rolling conformity, that Iowa taxpayers will not be taxed on the qualified portion of tips and overtime and benefit from the car-loan interest deduction, and that Iowa conforms to the $6,000 deduction for taxpayers 65 or older.Other articles citing this source
- GovernmentTIR 26-4: Massachusetts Conformity to Certain Provisions in Public Law No. 119-21Massachusetts Department of Revenue · published 2026-06-23 · checked 2026-10-21Conformity chart marks §70201 (tips), §70202 (overtime) and §70203 (car loan interest) as not adopted for the personal income tax; gross income follows the Code as of January 1, 2024. The senior deduction is not in the chart.Other articles citing this source
- GovernmentNew Deductions for Qualified Overtime Compensation and Qualified TipsMichigan Department of Treasury · published 2026-01-06 · checked 2026-10-20Quotes MCL 206.30(1)(ee) as amended by 2025 PA 24 (signed October 7, 2025): Michigan taxable income deducts the federal §224 tip and §225 overtime deductions for tax years 2026, 2027 and 2028 only, nothing for 2025; nonresidents deduct only amounts attributable to Michigan services.Other articles citing this source
- GovernmentOne Big Beautiful Bill Act (OBBBA) and New JerseyNew Jersey Division of Taxation · checked 2026-10-21States that for 2025 through 2028 the federal overtime, tips and senior deductions do not affect the NJ-1040, because the Gross Income Tax is not computed from federal AGI.Other articles citing this source
- GovernmentFAQs Regarding Recent Session Law ChangesNorth Carolina Department of Revenue · checked 2026-10-21On Session Law 2026-31: the OBBBA deductions are taken after AGI and do not affect North Carolina taxable income, and the General Assembly did not enact a similar state deduction.Other articles citing this source
- Government2025 North Dakota Individual Income Tax BookletNorth Dakota Office of State Tax Commissioner · checked 2026-10-21States that North Dakota's starting point perpetually conforms to the computation of federal taxable income, so federal changes are included by default, and names the $6,000 senior deduction and the tip and overtime deductions among them.Other articles citing this source
- GovernmentGovernor Ivey Signs Bill to Provide Tax Relief to Hardworking AlabamiansOffice of the Governor of Alabama · published 2026-04-16 · checked 2026-10-21Announces the signing of HB 527, an Alabama income tax deduction of up to $1,000 of overtime pay for tax years 2026 through 2028.Other articles citing this source
- Government2026 Summary of LegislationOregon Department of Revenue · checked 2026-10-21Summarises SB 1507 (Oregon Laws 2026, chapter 142), which disconnects the passenger vehicle loan interest deduction for tax years beginning on or after January 1, 2026.Other articles citing this source
- GovernmentPublication OR-17 — 2025 Oregon Individual Income Tax GuideOregon Department of Revenue · checked 2026-10-21Oregon does not tax Social Security (ORS 316.054). The federal pension subtraction is the share of service before October 1, 1991 (ORS 316.680(1)(e)). The retirement income credit (ORS 316.157) is 9% of eligible retirement income at 62 or older, for household income under $22,500 ($45,000 joint) and Social Security under $7,500 ($15,000).Other articles citing this source
- GovernmentTax Cuts and Jobs Act and One Big Beautiful Bill ActPennsylvania Department of Revenue · checked 2026-10-21Marks the senior deduction, personal (vehicle loan) interest, tips and overtime provisions "N/A" for the Pennsylvania personal income tax, which has no counterpart deduction.Other articles citing this source
- GovernmentInformation Letter #26-4: South Carolina Internal Revenue Code Conformity UpdateSouth Carolina Department of Revenue · published 2026-01-30 · checked 2026-10-21South Carolina conforms to the IRC as of December 31, 2024; taxpayers must adjust their South Carolina return for the federal senior, tips, overtime and car-loan interest deductions.Other articles citing this source
- GovernmentPractitioner Webinar, January 15, 2026Utah State Tax Commission · published 2026-01-15 · checked 2026-10-21States that the new federal Schedule 1-A deductions have no effect on the Utah return because they are below the line and change neither federal AGI nor the standard or itemized deduction.Other articles citing this source
- Government2025 Fall Tax Update (slides)Wisconsin Department of Revenue · published 2025-11-03 · checked 2026-10-21For each of the tips, overtime, car-loan interest and senior deductions, states that Wisconsin has not adopted the new federal deduction.Other articles citing this source
- Official recordMeasure Status: HB 2329 (2026)Hawaii State Legislature · checked 2026-10-21Records HB 2329 as Act 035, approved May 26, 2026 (Gov. Msg. No. 1135).Other articles citing this source
- Official recordHouse Bill 559 (2026): Statement of PurposeIdaho Legislature · checked 2026-10-21States that the bill fully conforms Idaho to the tax changes in the One Big Beautiful Bill with two exceptions, bonus depreciation and research-and-experimental expensing.Other articles citing this source
- Official recordHB 757 (2026 RS) bill recordKentucky General Assembly · checked 2026-10-21Records the veto override and delivery to the Secretary of State on April 14, 2026, as 2026 Acts Chapter 161.Other articles citing this source
- Official recordUpdated H.R. 1 Impacts to Montana RevenueMontana Legislative Fiscal Division · published 2025-07-11 · checked 2026-10-21Because Montana starts from federal taxable income, estimates the annual Montana revenue effect of the federal senior, car-loan, tips and overtime deductions flowing through to the Montana return.Other articles citing this source
- Official recordSB 1507 (2026) Staff Measure SummaryOregon Legislative Revenue Office · checked 2026-10-21Staff summary of SB 1507: disconnects Oregon from the federal qualified passenger vehicle loan interest deduction beginning with tax year 2026.Other articles citing this source
- Official recordH.3368 (2025-2026 session) bill historySouth Carolina Legislature · checked 2026-10-21Records the 2026 conformity bill failing second reading in the Senate, 16 to 27, on March 31, 2026.Other articles citing this source