State Tax on Tips and Overtime: State-by-State Tracker (2025–2026)
The federal deductions for qualified tips and overtime (IRC §§ 224 and 225) only cut federal income tax. Whether your state gives the same break depends on how its income tax starts and whether it passed its own law. This tracker covers only states where we found an official state source. Everything else is marked unconfirmed.
Checked October 26, 2026. State laws in this area changed several times during 2026. Always confirm with the linked state page for the tax year you're filing. A state that's missing below is not confirmed either way.
Why do some states follow it automatically?
The federal deductions are taken on Schedule 1-A after adjusted gross income (AGI). States that start from federal AGI don't pick them up unless they pass a law. States that start from federal taxable income can pick them up automatically. North Dakota, for example, says its starting point "perpetually conforms" to federal taxable income, so federal changes are included "for all years" (ND 2025 booklet).
State-by-state table
| State | Tips | Overtime | Years / how | Official source |
|---|---|---|---|---|
| Arizona | Subtraction allowed | Subtraction allowed | Tax years beginning Jan. 1, 2025, under HB 4168 (Laws 2026, Ch. 140); on the 2025 forms first via Executive Order 2025-15 | azleg.gov bill summary, ADOR |
| Colorado | Follows federal (no addback) | Added back | Overtime addback "for tax years 2026 and later" | CO Individual Income Tax Guide, Jan. 2026 |
| Georgia | Up to $1,750 exempt | Up to $1,750 exempt | Listed under 2026 income tax changes; Georgia did not conform to the federal rules | GA DOR |
| Idaho | Deduction | Deduction | 2025 returns (Form 40 line 18; Form 43 line 40 with Idaho Worksheet 1-A) | Idaho State Tax Commission |
| Indiana | Deduction | Deduction | 2026 tax year only; can't exceed the federal deduction | IN DOR Info. Bulletin #128 |
| Iowa | Follows federal | Follows federal | Starts from federal taxable income; don't claim again on IA 126 | Iowa DOR conformity |
| Michigan | Deduction | Deduction | Tax years 2026–2028 (not 2025), mirrors federal amounts | MI Treasury notice, Jan. 6, 2026 |
| Montana | Follows federal | Follows federal | 2025: included in Montana taxable income calculation | MT 2025 Form 2 instructions |
| North Dakota | Follows federal | Follows federal | Perpetual conformity to federal taxable income | ND 2025 booklet |
| Oregon | Deduction | Deduction | 2025 (ORS 316.048); subtraction codes 390 (tips) and 391 (overtime) | OR Publication OR-17, 2025 |
No wage income tax
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming don't tax wages, so there's no state income tax on tips or overtime to begin with.
State notes
Arizona
ADOR's 2025 forms included the tips and overtime subtractions under the governor's executive order, and ADOR warned some filers might need to amend later. It said amended 2025 returns filed by October 15, 2027 wouldn't face penalties or interest (ADOR, Jan. 30, 2026). HB 4168, signed and chaptered as Laws 2026, Ch. 140, adds subtractions for tips deducted under § 224 and overtime deducted under § 225 "for taxable years beginning January 1, 2025" (azleg.gov).
Unconfirmed: ADOR's post-enactment instructions for anyone who needs to amend a 2025 return. Check azdor.gov before filing Form 140X.
Colorado
Colorado starts from federal taxable income. Its January 2026 guide says that for tax years 2026 and later, anyone who claims the federal overtime deduction "must add back the amount of the deduction" on the Colorado return, and that no addback is required for qualified tips (CO guide).
Unconfirmed: Colorado's treatment of the overtime deduction on 2025 returns. The guide's addback language starts with 2026.
Georgia
Georgia DOR says: "Georgia did not conform to the exemptions from income for overtime and tipped wages in the One Big Beautiful Bill Act. However, up to $1,750 of each may be exempted from the calculation of taxable net income," listed under 2026 income tax changes (GA DOR).
Unconfirmed: the years after 2026 and the exact Georgia form line. Check the Georgia Form 500 instructions for your year.
Indiana
Indiana's deductions apply to the 2026 tax year only. They start from the amount you deducted federally and can't be more than the federal deduction (IB #128).
Michigan
Michigan's law (2025 PA 24) creates deductions for tax years 2026 through 2028, so 2025 Michigan returns don't get them. Nonresidents can deduct only amounts for services performed in Michigan (MI Treasury).
Oregon
Oregon allows the same tips and overtime deductions on 2025 returns. Full-year residents use subtraction codes 390 (tips) and 391 (overtime); part-year residents and nonresidents use modification codes and are limited to Oregon-source amounts (OR-17).
Unconfirmed: Oregon's 2026 treatment. News reports say Oregon decoupled from a different federal deduction for 2026, but we haven't seen 2026 Oregon instructions yet.
Idaho, Iowa, Montana and North Dakota
These are verified for 2025 returns. Iowa and North Dakota describe rolling or perpetual conformity, so they'd normally follow federal in 2026 too.
Unconfirmed: Idaho's and Montana's 2026 treatment. Check the 2026 instructions when they're published.
What about states not listed?
Unconfirmed: all other states. Many start from federal AGI and would need their own law. Some bills were vetoed or failed in 2026, according to news reports we haven't verified with state sources. Check your state revenue department.
Does any state change Social Security and Medicare tax?
No. Those are federal payroll taxes, and the federal deductions don't change them either. See the federal rules and the general state overview.
Sources
- Arizona HB 4168 signed bill summary (azleg.gov) and ADOR guidance on 2025 forms
- Colorado Individual Income Tax Guide, January 2026
- Georgia DOR important tax updates
- Idaho State Tax Commission conformity deductions and Idaho Worksheet 1-A
- Indiana DOR Information Bulletin #128
- Iowa DOR IRC conformity and 2025 IA 1040 expanded instructions
- Michigan Treasury notice, Jan. 6, 2026
- Montana 2025 Form 2 instructions
- North Dakota 2025 individual income tax booklet
- Oregon Publication OR-17 (2025)
- 26 U.S. Code § 224 – Qualified tips and § 225 – Qualified overtime compensation
→ Estimate your deduction with the free calculator
More guides
- 7 Common Mistakes Claiming No Tax on Tips or Overtime
- How to Claim No Tax on Tips and Overtime on Your Return (Schedule 1-A)
- No Tax on Tips: Federal Rules Explained (2025–2028)
- No Tax on Overtime: How Much Will I Save? Real Examples
- No Tax on Tips & Overtime Phase-Out Explained (MAGI $150,000 / $300,000)
- What Counts as Qualified Overtime for the No Tax on Overtime Deduction
- No Tax on Tips for Self-Employed and Gig Workers
- Does No Tax on Tips Apply to State Taxes?
- No Tax on Tips for Servers and Bartenders: Worked Examples
- Which Jobs Qualify for No Tax on Tips? Eligible Occupations
- W-2 Box 12 Codes TP and TT: Tips and Overtime Reporting