California tips tax calculator — the FTB says no
California taxes every dollar of tips: the Franchise Tax Board says the federal change “came after” the state’s January 1, 2025 conformity date, so “California does not conform to the deduction for tips received.” Employers also cannot count tips toward the $16.90 minimum.
A bill that would only help itemizers
The FTB’s own analysis of SB 984 shows how California might respond: the bill would conform with modification, allowing a tips deduction only to taxpayers who itemize — unlike the federal deduction, which works alongside the standard deduction. It had not been enacted when we checked, so for both 2025 and 2026 the full amount of tips stays in California taxable income.
California figures
| Cash wage / minimum | $16.90 (no tip credit) |
|---|---|
| In force | July 1, 2026 – December 31, 2026 |
| Next change | January 1, 2027: $17.40 |
| Tipped threshold | Not applicable — no tip credit |
| Tips on the 2025 return | tips stay taxable in this state. FTB: the federal change came after California’s Jan. 1, 2025 conformity date, so “California does not conform to the deduction for tips received.” Source: California Franchise Tax Board |
| Tips on the 2026 return | tips stay taxable in this state. SB 984 proposed a modified state deduction; it had not been enacted when we checked. Source: California Franchise Tax Board |
Every hour at the full rate
The Labor Commissioner answers the tip-credit question in one word: no. Tips are always on top of the minimum, which the Department of Finance certified on July 31, 2026 will rise to $17.40 on January 1, 2027. Fast-food and covered health-care workers have their own higher minimums, and many cities set local rates above the state floor.
A Los Angeles server in 2026
A single server with $20,000 of tips and $34,000 of wages deducts $20,000 federally and saves $2,400. California taxes the same $20,000 in full. Thirty hours at $16.90 is $507 of wages owed before tips — the $300 of tips are simply extra, and the make-up owed is $0.
Check a California week at the full minimum
Where these figures come from
- California Franchise Tax Board · California Labor Commissioner (DLSE)
- Summary of Federal Income Tax Changes (OBBBA section 70201, No tax on tips) (2026)
- Minimum Wages for Tipped Employees (table by state) (2026-07-01)
- California’s minimum wage set to increase to $17.40 per hour on January 1, 2027 (DIR news 2026-66) (2026)
Federal rules: how the deduction works. Nearby: Oregon, Nevada, Arizona.
Figures verified against primary sources on