No tax on tips and overtime by state: does your state follow?
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Work out your own numbers with the no tax on tips calculator.
The federal deductions for tips and overtime cut your federal income tax only. Your state decides for itself. Some states copy the federal rule, some have their own smaller deduction and many still tax tips and overtime in full. This guide sorts the states into groups. State laws change often, so confirm with your state’s department of revenue.
For the federal rules, see no tax on tips and no tax on overtime.
States with no income tax on wages
These states do not tax wages at all, so tips and overtime are already state tax-free:
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
States with their own deduction
| State | Rule | Years |
|---|---|---|
| Michigan | State deduction equal to the federal tips and overtime deductions. Nonresidents count only Michigan-sourced income. | 2026 to 2028 (not 2025) |
| Georgia | Up to $1,750 of tips and up to $1,750 of overtime, for full-time hourly workers. Claimed on the state return. | 2026 to 2028 |
Michigan’s rule comes from 2025 Public Act 24 and a Michigan Treasury notice of January 6, 2026. Georgia’s comes from HB 463, signed May 11, 2026.
States that start from federal taxable income
Some states begin their income tax with federal taxable income. In those states, the federal deduction may lower state tax too, unless the state adds it back. Reported examples include Idaho, Iowa, Montana, North Dakota, Oregon and South Carolina. Each state can choose to add the deduction back, so check before you count on it.
Colorado is reported to add back the overtime deduction for 2026.
Other states with reported changes
Several other states have passed or proposed their own rules, including New York, Hawaii, Arizona, Indiana and Alabama. The details differ by state and year. Check your state department of revenue for the current rule before you file.
States that tax tips and overtime in full
Many states do not follow the federal deductions. Examples include California, Illinois, New Jersey and Massachusetts. Wisconsin’s governor vetoed a tips and overtime bill in April 2026. In these states, report tips and overtime as normal wages on your state return.
Example
A Michigan server earns $18,000 in tips in 2026. They deduct $18,000 on the federal return. Michigan also gives a deduction equal to the federal amount, so their Michigan taxable income falls by $18,000. A server in California with the same tips gets the federal deduction only.
Use the no tax on tips calculator or the no tax on overtime calculator to see your federal savings.
Common questions
Do I pay state tax on tips in 2026?
It depends on your state. Nine states have no wage tax. Michigan and Georgia have their own deductions for 2026. Most other states still tax tips.
Does the federal deduction lower my state tax automatically?
Only in some states that start from federal taxable income and do not add it back. Most states start from federal adjusted gross income, and the deduction comes after that, so it does not carry over.
Do the federal deductions cut Social Security and Medicare tax?
No. The deductions only cut federal income tax. Social Security and Medicare taxes still apply to all tips and overtime.
Where do I check my state’s rule?
Go to your state department of revenue website and search for “tips” or “overtime”. Look for a notice or form instructions for the tax year you are filing.
Updated: November 1, 2026. Based on the Michigan Department of Treasury notice of January 6, 2026, Georgia HB 463 (2026) and state tax agency guidance. State rules change often. Check your state department of revenue before you file.