“No tax on tips” and “no tax on overtime” are federal deductions. Each state decides whether to follow them, and most don't. For tax year 2026 (returns filed in 2027):
- 9 states have no income tax on wages, so tips and overtime aren't taxed by the state at all.
- 9 states let you deduct both tips and overtime on the state return (some with their own rules).
- 3 states give a break for tips but still tax overtime.
- 2 states have a smaller, partial break of their own.
- 28 states still tax both.
Why most states still tax them
Most state returns start from your federal adjusted gross income (AGI). The new deductions are taken on Schedule 1-A after AGI, so they never reach those state returns unless the state passes its own law. A few states start from federal taxable income and pick the deductions up automatically, unless they choose to “decouple”.
State-by-state, tax year 2026
| State | Tips | Overtime | Notes |
|---|---|---|---|
| Alabama † | Taxed | Partial | Reported: a smaller state overtime deduction (up to $1,000) for 2026–2028; no state tips deduction. |
| Alaska | No state income tax | No state income tax | |
| Arizona | Deductible | Deductible | Arizona's 2026 budget adopted the federal deductions for state tax. |
| Arkansas | Taxed | Taxed | |
| California | Taxed | Taxed | California decoupled from the federal deductions. |
| Colorado | Deductible | Taxed | Colorado allows the tips deduction but adds overtime back from 2026. |
| Connecticut | Taxed | Taxed | |
| Delaware | Taxed | Taxed | |
| District of Columbia † | Deductible | Deductible | Reported: allowed for 2026 under a temporary law, not for 2025. Confirm before filing. |
| Florida | No state income tax | No state income tax | |
| Georgia | Partial | Partial | Georgia has its own capped exclusion for 2026–2028: up to $1,750 of overtime and $1,750 of cash tips. |
| Hawaii † | Deductible | Taxed | Reported: tips conform from 2026; overtime is still taxed. |
| Idaho | Deductible | Deductible | |
| Illinois | Taxed | Taxed | Illinois requires the federal deductions to be added back. |
| Indiana | Deductible | Deductible | Indiana allows both from tax year 2026 (not 2025). |
| Iowa | Deductible | Deductible | |
| Kansas | Taxed | Taxed | |
| Kentucky | Taxed | Taxed | |
| Louisiana | Taxed | Taxed | |
| Maine | Taxed | Taxed | |
| Maryland | Taxed | Taxed | |
| Massachusetts | Taxed | Taxed | |
| Michigan | Deductible | Deductible | Michigan has its own state deduction for 2026–2028 (not 2025). |
| Minnesota | Taxed | Taxed | |
| Mississippi | Taxed | Taxed | |
| Missouri | Taxed | Taxed | |
| Montana | Deductible | Deductible | |
| Nebraska | Taxed | Taxed | |
| Nevada | No state income tax | No state income tax | |
| New Hampshire | No state income tax | No state income tax | |
| New Jersey | Taxed | Taxed | |
| New Mexico | Taxed | Taxed | |
| New York | Deductible | Taxed | New York has its own tips exclusion (up to $25,000) from 2026; overtime is still taxed. |
| North Carolina | Taxed | Taxed | |
| North Dakota | Deductible | Deductible | |
| Ohio | Taxed | Taxed | |
| Oklahoma | Taxed | Taxed | |
| Oregon | Deductible | Deductible | |
| Pennsylvania | Taxed | Taxed | |
| Rhode Island | Taxed | Taxed | |
| South Carolina | Taxed | Taxed | |
| South Dakota | No state income tax | No state income tax | |
| Tennessee | No state income tax | No state income tax | |
| Texas | No state income tax | No state income tax | |
| Utah | Taxed | Taxed | |
| Vermont | Taxed | Taxed | |
| Virginia | Taxed | Taxed | |
| Washington | No state income tax | No state income tax | |
| West Virginia | Taxed | Taxed | |
| Wisconsin | Taxed | Taxed | |
| Wyoming | No state income tax | No state income tax |
† Reported by a single source so far. Confirm with your state's department of revenue before you file.
Car loan interest and the senior deduction
State treatment of these two is just as uneven. A few states that follow federal taxable income allow them, and Colorado and Alabama have been reported to allow the car loan interest deduction. Oregon has ended its version of the car loan deduction for 2026. Check your state's instructions.
How to use this with our calculators
Choose your state in the tips, overtime or all-deductions calculator and you'll see the rule for your state next to your federal result.
State laws are changing quickly in 2026. We review this table regularly; the date at the top shows the last check.
Common questions
Which states don't tax tips?
For 2026: the nine states with no wage income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming), plus states that allow a tips deduction, including Arizona, Colorado, Idaho, Indiana, Iowa, Michigan, Montana, New York, North Dakota and Oregon. Georgia offers a smaller capped exclusion.
Does California tax tips and overtime?
Yes. California decoupled from the federal deductions, so tips and overtime are still fully taxed on your California return.
Does New York tax overtime?
Yes. New York created its own exclusion for tips (up to $25,000) starting in 2026, but overtime is still taxed by the state.
Does Texas tax tips?
No. Texas has no state income tax on wages, so tips and overtime aren't taxed by the state.
Sources
- 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)
- CBIZ: New York enacts FY2027 budget (tips exclusion)
- Cronkite News: Arizona budget deal and tip tax relief (Jun. 15, 2026)
- SBAM: Michigan approves state tax breaks on tips and overtime
- Indiana Capital Chronicle: State tax cut for overtime and tips
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