Which states still tax overtime in 2026?
For tax year 2026, 31 of the 51 US state-level jurisdictions (50 states plus the District of Columbia) still tax overtime pay at the state level, 9 let the federal no-tax-on-overtime deduction flow through so it is effectively state-tax-free, and 9 have no state wage income tax at all; the remaining 2 offer only a partial exclusion or have not settled the question.
The 2025 One Big Beautiful Bill Act created a federal deduction for overtime pay — but it only cuts federal income tax. Whether your state also stops taxing overtime depends entirely on where you live. We computed the answer for every US jurisdiction for tax year 2026, from primary state sources. Here is where overtime is still taxed, where it is now effectively tax-free, and where it is still unsettled.
31
jurisdictions still tax overtime
9
jurisdictions make the premium effectively tax-free
9
states with no wage income tax at all
2
partial or still-unclear for 2026
The short version: most states still tax overtime in 2026. The federal deduction is the headline, but state conformity is the deciding factor for your take-home pay — and the map is still moving. District of Columbia, Indiana, Michigan: overtime newly tax-free for 2026; Colorado: overtime taxed again in 2026 (subject to change); Alabama, Georgia: only a partial state exclusion.
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State-by-state: overtime & tips conformity, tax year 2026
Tap a column header to sort. "Still taxed" means the state does not adopt the federal deduction, so the overtime premium remains taxable on your state return. Figures are for tax year 2026 and reflect the federal OBBBA premium deduction only.
| State | Overtime taxed? (2026) | Tips taxed? (2026) | Notes & source |
|---|---|---|---|
| Alabama | Partial changed from 2025 | Still taxed | Alabama does not follow the full federal overtime deduction, but it has a smaller one of its own for tax years 2026 through 2028 (Act 2026-604). You can deduct the extra part of your overtime pay above your normal rate, the "half" in time and a half, up to $1,000 a year, on your Alabama return. You claim it when you file, so it does not change your paychecks. Because Alabama also lets you subtract your federal income tax, the federal overtime deduction raises your Alabama tax by about 5 cents per dollar it saves you, which can outweigh what this $1,000 deduction saves you. Tips get no Alabama deduction, and the federal tips deduction raises your Alabama tax the same way. Alabama's earlier, full overtime exemption ended June 30, 2025. source |
| Alaska | No state wage tax | No state wage tax | Alaska has no state income tax on wages, so there is no state return to deduct on — your federal saving is the whole story. source |
| Arizona | Tax-free | Tax-free | Arizona starts from your federal adjusted gross income, a figure worked out before the federal tips and overtime deductions come off. Arizona's 2026 tax law, HB 4168 (signed June 13, 2026), lets you subtract both deductions on your Arizona return too, for 2025 and later. For 2025, residents claim them on Form 140, not Form 140A or 140EZ. source |
| Arkansas | Still taxed | Still taxed | Arkansas has not adopted the federal tips/overtime deductions for state income tax as of mid-2026, so they reduce your federal tax only. source |
| California | Still taxed | Still taxed | California has not adopted the federal tips/overtime deductions for state income tax as of mid-2026, so they reduce your federal tax only. source |
| Colorado | Still taxed changed from 2025 | Tax-free | Colorado allows the tips deduction both years. The overtime deduction flows through for 2025 but is added back from 2026 (HB25-1296), which is under a pending legal challenge. source |
| Connecticut | Still taxed | Still taxed | Connecticut has not adopted the federal tips/overtime deductions for state income tax as of mid-2026, so they reduce your federal tax only. source |
| Delaware | Still taxed | Still taxed | Delaware has not adopted the federal tips/overtime deductions for state income tax as of mid-2026, so they reduce your federal tax only. source |
| District of Columbia | Tax-free changed from 2025 | Tax-free | Under the DC law in effect now, you can take the federal tips and overtime deductions on your DC return starting with tax year 2026. For 2025 you cannot, so for that year they lower your federal tax only. The law in effect now is an emergency DC law (D.C. Act 26-416) that lasts until November 11, 2026. The District's 2027 budget law (D.C. Act 26-418) has the same rule; Congress is reviewing it, and it is expected to take effect around November 20, 2026. DC's tax office has not yet published 2026 forms that show these deductions. source |
| Florida | No state wage tax | No state wage tax | Florida has no state income tax on wages, so there is no state return to deduct on — your federal saving is the whole story. source |
| Georgia | Partial changed from 2025 | Partial | Georgia decouples from the full federal deductions. For tax years 2026 through 2028 it offers a smaller capped state exclusion instead (HB 463, signed May 11, 2026: up to $1,750 of qualified overtime and $1,750 of cash tips), not the full federal amount. source |
| Hawaii | Still taxed | Tax-free | Act 35 (2026) brings Hawaii in line with the federal tips deduction from tax year 2026, so qualified tips come off your Hawaii taxable income too. Hawaii did not adopt the federal overtime deduction, so overtime premium pay is still taxed by Hawaii. source |
| Idaho | Tax-free | Tax-free | Idaho starts from federal taxable income and conformed via HB559 (2026), retroactive to 2025 — the deductions flow through. source |
| Illinois | Still taxed | Still taxed | Illinois has not adopted the federal tips/overtime deductions for state income tax as of mid-2026, so they reduce your federal tax only. source |
| Indiana | Tax-free changed from 2025 | Tax-free | Indiana did not allow these deductions for 2025. Senate Enrolled Act 243 adopts them for tax year 2026 only, so 2027 and 2028 are not covered unless Indiana passes another law. source |
| Iowa | Tax-free | Tax-free | Iowa conforms (federal-taxable-income base); the deductions flow through to the state return. source |
| Kansas | Still taxed | Still taxed | Kansas has not adopted the federal tips/overtime deductions for state income tax as of mid-2026, so they reduce your federal tax only. source |
| Kentucky | Still taxed | Still taxed | Kentucky does not allow the federal tips and overtime deductions on the state return. For 2026, a 2026 state law (House Bill 757) bars them by name. They reduce your federal tax only. source |
| Louisiana | Still taxed | Still taxed | Louisiana has not adopted the federal tips/overtime deductions for state income tax as of mid-2026, so they reduce your federal tax only. source |
| Maine | Still taxed | Still taxed | Maine has not adopted the federal tips/overtime deductions for state income tax as of mid-2026, so they reduce your federal tax only. source |
| Maryland | Still taxed | Still taxed | Maryland has not adopted the federal tips/overtime deductions for state income tax as of mid-2026, so they reduce your federal tax only. source |
| Massachusetts | Still taxed | Still taxed | Massachusetts has not adopted the federal tips/overtime deductions for state income tax as of mid-2026, so they reduce your federal tax only. source |
| Michigan | Tax-free changed from 2025 | Tax-free | Michigan starts from federal AGI, so there is no automatic flow-through. A state subtraction applies for 2026–2028 but NOT for 2025. source |
| Minnesota | Still taxed | Still taxed | Minnesota has not adopted the federal tips/overtime deductions for state income tax as of mid-2026, so they reduce your federal tax only. source |
| Mississippi | Still taxed | Still taxed | Mississippi has not adopted the federal tips/overtime deductions for state income tax as of mid-2026, so they reduce your federal tax only. source |
| Missouri | Still taxed | Still taxed | Missouri has not adopted the federal tips/overtime deductions for state income tax as of mid-2026, so they reduce your federal tax only. source |
| Montana | Tax-free | Tax-free | Montana conforms; its 2025 forms allow the tips and overtime deductions. source |
| Nebraska | Still taxed | Still taxed | Nebraska has not adopted the federal tips/overtime deductions for state income tax as of mid-2026, so they reduce your federal tax only. source |
| Nevada | No state wage tax | No state wage tax | Nevada has no state income tax on wages, so there is no state return to deduct on — your federal saving is the whole story. source |
| New Hampshire | No state wage tax | No state wage tax | New Hampshire has no state income tax on wages, so there is no state return to deduct on — your federal saving is the whole story. source |
| New Jersey | Still taxed | Still taxed | New Jersey has not adopted the federal tips/overtime deductions for state income tax as of mid-2026, so they reduce your federal tax only. source |
| New Mexico | Still taxed | Still taxed | New Mexico has not adopted the federal tips/overtime deductions for state income tax as of mid-2026, so they reduce your federal tax only. source |
| New York | Still taxed | Tax-free | New York adopted its own 'no tax on tips' break in the FY2027 budget (signed May 28, 2026): up to $25,000 of tipped income is excluded from New York State income tax for tax years beginning in and after 2026, mirroring the federal rule. Overtime was NOT included — the federal overtime deduction reduces your federal tax only, and 2025 tips got no state relief. source |
| North Carolina | Still taxed | Still taxed | North Carolina has not adopted the federal tips/overtime deductions for state income tax as of mid-2026, so they reduce your federal tax only. source |
| North Dakota | Tax-free | Tax-free | North Dakota is a rolling-conformity state that starts from federal taxable income, so it automatically incorporates the federal overtime and tips deductions for tax years 2025–2028. No decoupling legislation has been enacted. source |
| Ohio | Still taxed | Still taxed | Ohio has not adopted the federal tips/overtime deductions for state income tax as of mid-2026, so they reduce your federal tax only. source |
| Oklahoma | Still taxed | Still taxed | Oklahoma has not adopted the federal tips/overtime deductions for state income tax as of mid-2026, so they reduce your federal tax only. source |
| Oregon | Tax-free | Tax-free | Oregon follows federal tax law as it changes, so the federal tips and overtime deductions also come off the income Oregon taxes. Oregon's 2026 tax law, SB 1507, does not add them back (it does add back the car loan interest deduction, from 2026). source |
| Pennsylvania | Still taxed | Still taxed | Pennsylvania has not adopted the federal tips/overtime deductions for state income tax as of mid-2026, so they reduce your federal tax only. source |
| Rhode Island | Still taxed | Still taxed | Rhode Island has not adopted the federal tips/overtime deductions for state income tax as of mid-2026, so they reduce your federal tax only. source |
| South Carolina | Still taxed | Still taxed | South Carolina does not allow the federal tips and overtime deductions on your South Carolina return. For 2025 it follows federal tax law only as it stood at the end of 2024, so you add them back. From 2026, South Carolina starts from your federal adjusted gross income, a figure worked out before these deductions come off, so they never reach the South Carolina return. source |
| South Dakota | No state wage tax | No state wage tax | South Dakota has no state income tax on wages, so there is no state return to deduct on — your federal saving is the whole story. source |
| Tennessee | No state wage tax | No state wage tax | Tennessee has no state income tax on wages, so there is no state return to deduct on — your federal saving is the whole story. source |
| Texas | No state wage tax | No state wage tax | Texas has no state income tax on wages, so there is no state return to deduct on — your federal saving is the whole story. source |
| Utah | Still taxed | Still taxed | Utah does not allow these federal deductions to reduce your Utah state tax. source |
| Vermont | Still taxed | Still taxed | Vermont has not adopted the federal tips/overtime deductions for state income tax as of mid-2026, so they reduce your federal tax only. source |
| Virginia | Still taxed | Still taxed | Virginia has not adopted the federal tips/overtime deductions for state income tax as of mid-2026, so they reduce your federal tax only. source |
| Washington | No state wage tax | No state wage tax | Washington has no state income tax on wages, so there is no state return to deduct on — your federal saving is the whole story. source |
| West Virginia | Still taxed | Still taxed | West Virginia has not adopted the federal tips/overtime deductions for state income tax as of mid-2026, so they reduce your federal tax only. source |
| Wisconsin | Still taxed | Still taxed | Wisconsin has not adopted the federal tips/overtime deductions for state income tax as of mid-2026, so they reduce your federal tax only. source |
| Wyoming | No state wage tax | No state wage tax | Wyoming has no state income tax on wages, so there is no state return to deduct on — your federal saving is the whole story. source |
Download the full dataset: CSV · JSON. Free to reuse with attribution to Tools Berry (CC BY 4.0).
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How we computed this
The federal deduction is fixed nationwide; the variation is entirely at the state level, driven by whether each state starts its income tax from federal adjusted gross income or taxable income, and whether it has passed legislation to adopt or decouple (keep the old rule instead of following the federal change) from the new federal deduction.
- Federal baseline (IRC §225)
- A deduction (claimed on Schedule 1-A after AGI, so it does not reduce your AGI) available whether or not you itemize, for the FLSA overtime premium only (the extra "half" of time-and-a-half), capped at $12,500 (single) or $25,000 (married filing jointly), for tax years 2025–2028, phasing out above $150,000 / $300,000 modified AGI (adjusted gross income with certain items added back). It reduces federal income tax, and state income tax only where the state allows it (the state table on this page shows which); FICA still applies.
- State conformity call (does the state follow the federal rule?)
- For each of the 50 states and DC we recorded whether, for tax year 2026, the state's tax base lets the federal overtime (and tips) deduction flow through ("still taxed" = no; "tax-free" = yes), plus partial or unclear cases where legislation is capped, pending, or administrative only.
- Sources
- Official sources only: each state's Department of Revenue or Taxation guidance, and the text of the bill that made the change. Each row links its source. Nine states have no wage income tax, so the question is moot there.
- Scope & limits
- This covers state income tax treatment of the federal deduction for 2026 only; several states' 2027–2028 treatment is unsettled and some 2026 rules face legal challenges (noted per state). This is computed general information, not tax advice.
Cite this data
Free to use and republish with attribution. Suggested citation:
Tools Berry, "Which States Still Tax Overtime in 2026?", tools-berry.com/data/overtime-tax-by-state/ (updated October 2, 2026).
Download: CSV · JSON · licensed CC BY 4.0. Journalists: happy to provide the underlying per-state sources or a custom cut — contact us.
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