| Tax year 2026 | Tips | Overtime |
|---|---|---|
| Federal return (Schedule 1-A) | Deductible up to $25,000 | Premium deductible up to $12,500 ($25,000 joint) |
| California state return | still taxed by the state | still taxed by the state |
California decoupled from the federal deductions.
The federal deduction still applies in California
Whatever California does, you can still claim the federal deductions on Schedule 1-A if you qualify. For example, in 2026:
- A single server with $40,000 of income and $15,000 of qualified tips saves about $1,730 of federal income tax.
- A single hourly worker with $60,000 of income and $4,000 of overtime premium saves about $480.
Social Security and Medicare still apply to tips and overtime in every state.
What to do
- Estimate your federal savings with the tips calculator or overtime calculator (your state is already selected).
- Check the official rules at the California tax agency before you file your state return.
- See all 50 states.
Other states: Texas, Florida, New York, Illinois, Georgia, Arizona, Nevada, New Jersey, Colorado, North Carolina, Pennsylvania.
Common questions
Does California tax tips in 2026?
Yes. Tips are still taxed on the California return.
Does California tax overtime in 2026?
Yes. Overtime is still taxed on the California return.
Can I still claim the federal deduction if I live in California?
Yes. The federal tips and overtime deductions apply in every state, on Schedule 1-A of your federal return.
Sources
- California state tax agency
- Tools Berry: Which states still tax tips in 2026 (updated Oct. 2, 2026)
- AP / PBS NewsHour: State tax returns and the tips and overtime breaks (Apr. 13, 2026)
- Clockspot: No tax on overtime by state (May 25, 2026)
See how Taxlumo calculates and our editorial policy.