| Tax year 2026 | Tips | Overtime |
|---|---|---|
| Federal return (Schedule 1-A) | Deductible up to $25,000 | Premium deductible up to $12,500 ($25,000 joint) |
| New Jersey state return | still taxed by the state | still taxed by the state |
The federal deduction still applies in New Jersey
Whatever New Jersey 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 New Jersey tax agency before you file your state return.
- See all 50 states.
Other states: California, Texas, Florida, New York, Illinois, Georgia, Arizona, Nevada, Colorado, North Carolina, Pennsylvania.
Common questions
Does New Jersey tax tips in 2026?
Yes. Tips are still taxed on the New Jersey return.
Does New Jersey tax overtime in 2026?
Yes. Overtime is still taxed on the New Jersey return.
Can I still claim the federal deduction if I live in New Jersey?
Yes. The federal tips and overtime deductions apply in every state, on Schedule 1-A of your federal return.
Sources
- New Jersey 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)
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