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Does Your State Tax Your Tips? No Tax on Tips, State by State (2026)

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Quick answer: Probably, yes. The federal No Tax on Tips deduction lowers only your federal income tax, and most states start their own tax from a line that comes before it. On 2025 state returns, only Arizona, Colorado, Idaho, Iowa, Montana, North Dakota and Oregon let you take it. For 2026 returns, filed in 2027, D.C., Hawaii, Indiana, Michigan and New York join them, and Georgia exempts up to $1,750 of tips. Nine states have no income tax on wages. Everywhere else, tips are taxed on your state return, as of October 18, 2026.

Tip’d, our free iPhone tip tracker, adds up the tips you kept this year and compares them with the $25,000 federal limit on its Year screen.

The No Tax on Tips deduction lets you take up to $25,000 of reported tips off your federal taxable income each year from 2025 through 2028. Then you get to your state return, and in most states the tips are right back on it. The deduction is federal law. Each state decides for itself whether to follow it, and most haven't.

We checked every state with an income tax against its own tax department, forms or laws, for the 2025 returns filed this year and the 2026 returns you'll file in 2027. Here's where your state stands, why, and what to do about it.

The short answer

Map of the states for 2026 state income tax returns. Taking the federal No Tax on Tips deduction: Arizona, Colorado, District of Columbia, Hawaii, Idaho, Indiana, Iowa, Michigan, Montana, New York, North Dakota and Oregon; for District of Columbia, Hawaii, Indiana, Michigan and New York it's new with 2026 returns. A smaller tip break of its own, up to $1,750 of tips, cash or card: Georgia. Taxing tips on the state return: Alabama, Arkansas, California, Connecticut, Delaware, Illinois, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Nebraska, New Jersey, New Mexico, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Utah, Vermont, Virginia, West Virginia and Wisconsin. No income tax on wages: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.
For the 2026 returns you'll file in 2027. Tap to zoom.

Why most states still tax your tips

It comes down to where your state starts. Most state returns begin with a number copied from your federal return, and the tip deduction comes after the number most of them copy.

The federal return from top to bottom: wages and the tips you reported (line 1a); adjusted gross income (line 11a), where most states start; minus the standard (or itemized) deduction (line 12e); minus the No Tax on Tips deduction (line 13b, from Schedule 1-A); taxable income (line 15), where a few states start. The tip deduction comes after adjusted gross income, so a state that starts there doesn’t get it unless it passes a law to add it, and a state that starts from taxable income gets it unless it takes it back out.
The tip deduction sits below the line most states start from. Tap to zoom.

On the 2025 Form 1040, the No Tax on Tips deduction goes on line 13b, from Schedule 1-A, after your adjusted gross income on line 11a. Most states start from adjusted gross income, so the deduction never reaches them. Nebraska's Department of Revenue put it plainly: the new deductions “are taken after the computation of the federal AGI.” Those states would have to pass a law adding a deduction of their own, as D.C., Indiana, Michigan and New York did for 2026.

A few states start from federal taxable income, line 15, which already has the tip deduction taken out. Colorado, Iowa, Montana and North Dakota get it automatically. Idaho and Oregon start from adjusted gross income but let you take the same deduction on the state return. South Carolina started from taxable income for 2025 but hasn't adopted the deduction, so it makes you add it back. A handful of states, like Pennsylvania and New Jersey, don't start from your federal return at all and tax tips as wages under their own rules.

Every state, 2025 and 2026

As of October 18, 2026. “Yes” means you can take the federal tip deduction, or a state copy of it, on your state return.

State2025 return2026 return
AlabamaNoNo
AlaskaNo tax on wagesNo tax on wages
ArizonaYesYes
ArkansasNoNo
CaliforniaNoNo
ColoradoYesYes
ConnecticutNoNo
DelawareNoNo
District of ColumbiaNoYes
FloridaNo tax on wagesNo tax on wages
GeorgiaNoUp to $1,750 of tips
HawaiiNoYes
IdahoYesYes
IllinoisNoNo
IndianaNoYes, 2026 only so far
IowaYesYes
KansasNoNo
KentuckyNoNo
LouisianaNoNo
MaineNoNo
MarylandNoNo
MassachusettsNoNo
MichiganNoYes, 2026 to 2028
MinnesotaNoNo
MississippiNoNo
MissouriNoNo
MontanaYesYes
NebraskaNoNo
NevadaNo tax on wagesNo tax on wages
New HampshireNo tax on wagesNo tax on wages
New JerseyNoNo
New MexicoNoNo
New YorkNoYes
North CarolinaNoNo
North DakotaYesYes
OhioNoNo, a bill is pending
OklahomaNoNo
OregonYesYes
PennsylvaniaNoNo
Rhode IslandNoNo
South CarolinaNoNo
South DakotaNo tax on wagesNo tax on wages
TennesseeNo tax on wagesNo tax on wages
TexasNo tax on wagesNo tax on wages
UtahNoNo
VermontNoNo
VirginiaNoNo
WashingtonNo tax on wagesNo tax on wages
West VirginiaNoNo
WisconsinNoNo
WyomingNo tax on wagesNo tax on wages

If your state takes the deduction

In most of these states the cap, the income limits and the list of tipped jobs are the federal ones, so the amount is whatever you deducted on your federal Schedule 1-A. How you claim it differs:

If your state taxes your tips

Your tips are taxed on your state return like the rest of your pay. In Illinois, for example, with its flat 4.95% income tax, $20,000 of tips adds about $990 of state tax, whether or not you take the federal deduction. A few states said so outright: Massachusetts tells filers that “All tips income must be reported in Massachusetts,” and Kentucky's 2025 instructions say qualified tips “are not deductible on the Kentucky return.” South Carolina goes one step further for 2025: if you took the federal deduction, you add it back on your state return, and its Senate voted down a bill in March 2026 that would have adopted the 2025 federal changes, tip deduction included.

Many of these states had bills to add a tip deduction in 2026, and most stalled. Wisconsin's legislature passed one and the governor vetoed it; a later deal with the governor passed the Assembly in May 2026 but failed in the Senate. Ohio's is still in committee. And Social Security and Medicare tax apply to your tips in every state, federal deduction or not (except tips under $20 a month at one job).

Before you file in 2027

State legislatures meet again in early 2027, and some change their tax rules for the year that just ended. So treat the 2026 column as where things stand now, not the final word. When your state's 2026 instructions come out in January, look for a line about qualified tips or federal Schedule 1-A. We'll update this guide then. And keep your federal Schedule 1-A amount handy: every state that allows the deduction starts from it.

Keeping track with Tip’d

Every state that allows the deduction starts from the tips on your federal return, and those start with the tips you reported. Tip’d, a tip tracker for iPhone, keeps your cash and card tips and tip-outs for every shift you log, and its Year screen adds up the tips you kept and compares them with the $25,000 federal limit. Export the year as a spreadsheet or a summary PDF to check against your W-2 or hand to your tax preparer. Logging shifts is free, and they stay in your own iCloud.

Questions people ask

Does No Tax on Tips apply to state taxes?

Not by itself. It's a federal deduction. Your state follows it only if its law says so: on 2025 returns, that's Arizona, Colorado, Idaho, Iowa, Montana, North Dakota and Oregon.

Which states don't tax tips?

The nine with no income tax on wages (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming), plus the states that allow the deduction, up to its $25,000 limit.

Does California tax tips?

Yes. California doesn't follow the federal deduction, so tips are taxed on your California return for 2025, and 2026 bills to add one were held in committee.

Does New York tax tips?

For 2025, yes. Starting with 2026 returns, New York lets you subtract up to $25,000 of tips, as far as you're allowed the federal deduction.

Do I still pay Social Security and Medicare tax on tips?

Yes, in every state, except on tips under $20 a month at one job. No Tax on Tips covers federal income tax only, and the states that follow it cover only their own income tax.

Can I get the state deduction without the federal one?

Generally no. The states that allow it start from your federal deduction, so the same rules apply: a job on the IRS's list of tipped occupations, reported tips, a Social Security number valid for work, a joint return if you're married, and the income limits. Georgia's smaller break has rules of its own.

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