State income tax on tips, 2025 and 2026
The federal deduction is taken after adjusted gross income, so a state follows it only if its return starts from federal taxable income or the legislature writes a matching subtraction. For 2026, 11 states allow it, 1 has its own smaller exclusion, 9 have no wage tax and 30 still tax tips.
What changed between 2025 and 2026
Four states added the deduction for 2026 only: Hawaii (Act 35 adopted the 2025 Internal Revenue Code but switched off the overtime deduction), Indiana (a one-year deduction for 2026), Michigan (2026 through 2028 under 2025 PA 24) and New York (Tax Law § 612(c)(48), from 2026). Georgia created a $1,750 cash-tips exclusion for 2026–2028 instead of following the federal amount. Several attempts failed: Wisconsin’s exemption was vetoed and the veto sustained, South Carolina’s conformity bill failed in the Senate, and bills in Kansas, New Mexico, Maryland, Delaware and West Virginia did not pass.
The table
| State | 2025 | 2026 | Return starts from | Primary source |
|---|---|---|---|---|
| Alabama | Tips stay taxable in this state | Tips stay taxable in this state | Alabama gross income (Alabama does not start from the federal return) | Alabama Department of Revenue |
| Alaska | No state income tax on wages | No state income tax on wages | No individual income tax | Alaska Department of Revenue |
| Arizona | State allows the federal tips amount | State allows the federal tips amount | Federal adjusted gross income with Arizona subtractions | Arizona Legislature |
| Arkansas | Tips stay taxable in this state | Tips stay taxable in this state | Arkansas-defined gross income | Arkansas Department of Finance and Administration |
| California | Tips stay taxable in this state | Tips stay taxable in this state | Federal AGI with California adjustments (IRC conformity date Jan. 1, 2025) | California Franchise Tax Board |
| Colorado | State allows the federal tips amount | State allows the federal tips amount | Federal taxable income (Form 1040 line 15) | Colorado Department of Revenue |
| Connecticut | Tips stay taxable in this state | Tips stay taxable in this state | Federal adjusted gross income | Connecticut Department of Revenue Services |
| Delaware | Tips stay taxable in this state | Tips stay taxable in this state | Federal adjusted gross income | Delaware General Assembly |
| District of Columbia | Tips stay taxable in this state | Tips stay taxable in this state | Federal adjusted gross income | Council of the District of Columbia |
| Florida | No state income tax on wages | No state income tax on wages | No individual income tax | Florida Legislature |
| Georgia | Tips stay taxable in this state | First $1,750 excluded | Federal adjusted gross income | Georgia General Assembly / Office of the Governor |
| Hawaii | Tips stay taxable in this state | State allows the federal tips amount | Hawaii taxable income under the IRC as adopted by HRS § 235-2.3 | Hawaii State Legislature |
| Idaho | State allows the federal tips amount | State allows the federal tips amount | Federal adjusted gross income, with federal deductions adopted by Idaho’s conformity law | Idaho State Tax Commission |
| Illinois | Tips stay taxable in this state | Tips stay taxable in this state | Federal adjusted gross income | Illinois Department of Revenue |
| Indiana | Tips stay taxable in this state | State allows the federal tips amount | Federal adjusted gross income | Indiana Department of Revenue |
| Iowa | State allows the federal tips amount | State allows the federal tips amount | Federal taxable income (rolling conformity) | Iowa Department of Revenue |
| Kansas | Tips stay taxable in this state | Tips stay taxable in this state | Federal adjusted gross income | Kansas Legislature |
| Kentucky | Tips stay taxable in this state | Tips stay taxable in this state | Federal AGI under a fixed IRC conformity date | Kentucky Department of Revenue |
| Louisiana | Tips stay taxable in this state | Tips stay taxable in this state | Federal adjusted gross income | Louisiana Department of Revenue |
| Maine | Tips stay taxable in this state | Tips stay taxable in this state | Federal adjusted gross income | Maine Revenue Services |
| Maryland | Tips stay taxable in this state | Tips stay taxable in this state | Federal adjusted gross income | Maryland General Assembly / Department of Legislative Services |
| Massachusetts | Tips stay taxable in this state | Tips stay taxable in this state | Massachusetts gross income | Massachusetts Department of Revenue |
| Michigan | Tips stay taxable in this state | State allows the federal tips amount | Federal adjusted gross income | Michigan Department of Treasury |
| Minnesota | Tips stay taxable in this state | Tips stay taxable in this state | Federal adjusted gross income | Minnesota Department of Revenue |
| Mississippi | Tips stay taxable in this state | Tips stay taxable in this state | Mississippi gross income | Mississippi Department of Revenue |
| Missouri | Tips stay taxable in this state | Tips stay taxable in this state | Federal adjusted gross income | Missouri Department of Revenue |
| Montana | State allows the federal tips amount | State allows the federal tips amount | Federal taxable income | Montana Department of Revenue |
| Nebraska | Tips stay taxable in this state | Tips stay taxable in this state | Federal adjusted gross income | Nebraska Department of Revenue |
| Nevada | No state income tax on wages | No state income tax on wages | No individual income tax | Nevada Legislature |
| New Hampshire | No state income tax on wages | No state income tax on wages | No tax on wages | New Hampshire General Court |
| New Jersey | Tips stay taxable in this state | Tips stay taxable in this state | New Jersey gross income (defined categories, not federal AGI) | New Jersey Division of Taxation |
| New Mexico | Tips stay taxable in this state | Tips stay taxable in this state | Federal adjusted gross income | New Mexico Legislature |
| New York | Tips stay taxable in this state | State allows the federal tips amount | Federal adjusted gross income | New York State Legislature |
| North Carolina | Tips stay taxable in this state | Tips stay taxable in this state | Federal adjusted gross income | North Carolina Department of Revenue |
| North Dakota | State allows the federal tips amount | State allows the federal tips amount | Federal taxable income (Form 1040 line 15) | North Dakota Office of State Tax Commissioner / Legislative Assembly |
| Ohio | Tips stay taxable in this state | Tips stay taxable in this state | Federal adjusted gross income | Ohio Department of Taxation |
| Oklahoma | Tips stay taxable in this state | Tips stay taxable in this state | Federal adjusted gross income | Oklahoma Tax Commission |
| Oregon | State allows the federal tips amount | State allows the federal tips amount | Federal AGI with Oregon modifications | Oregon Department of Revenue |
| Pennsylvania | Tips stay taxable in this state | Tips stay taxable in this state | Pennsylvania classes of income (compensation) | Pennsylvania Department of Revenue |
| Rhode Island | Tips stay taxable in this state | Tips stay taxable in this state | Federal adjusted gross income | Rhode Island Division of Taxation |
| South Carolina | Tips stay taxable in this state | Tips stay taxable in this state | Federal taxable income, IRC as of Dec. 31, 2024 | South Carolina General Assembly |
| South Dakota | No state income tax on wages | No state income tax on wages | No individual income tax | South Dakota Department of Revenue |
| Tennessee | No state income tax on wages | No state income tax on wages | No tax on wages | Tennessee Department of Revenue |
| Texas | No state income tax on wages | No state income tax on wages | No individual income tax | Texas Legislature |
| Utah | Tips stay taxable in this state | Tips stay taxable in this state | Federal adjusted gross income | Utah State Tax Commission |
| Vermont | Tips stay taxable in this state | Tips stay taxable in this state | Federal adjusted gross income | Vermont Department of Taxes |
| Virginia | Tips stay taxable in this state | Tips stay taxable in this state | Federal adjusted gross income | Virginia Department of Taxation |
| Washington | No state income tax on wages | No state income tax on wages | No individual income tax | Washington State Department of Revenue |
| West Virginia | Tips stay taxable in this state | Tips stay taxable in this state | Federal adjusted gross income | West Virginia Legislature |
| Wisconsin | Tips stay taxable in this state | Tips stay taxable in this state | Federal adjusted gross income | Wisconsin Legislature |
| Wyoming | No state income tax on wages | No state income tax on wages | No individual income tax | Wyoming Department of Revenue |
How to read “starts from”
States that begin with federal taxable income — Colorado, Iowa, Montana, North Dakota and South Carolina — inherit the deduction unless they add it back; South Carolina is the one that does, because its conformity date is still December 31, 2024. States that begin with federal AGI never see the deduction unless they enact a subtraction, as Arizona, Indiana, Michigan, New York and Oregon did; Idaho reached the same result through its 2026 conformity law. A few states, such as Pennsylvania, New Jersey and Massachusetts, define income their own way, so no federal deduction reaches them.
Local income taxes follow their own base. New York City residents benefit from New York’s subtraction because the city tax uses New York AGI; Ohio municipal and Pennsylvania local earned-income taxes still reach tips.