Why this is two questions, not one
Almost everything written about this treats state conformity as a single yes or no. It is not. A state decides separately whether to follow the tips deduction and whether to follow the overtime one, and at least one state has already given different answers.
Colorado is the clearest case. It calculates state tax from your federal taxable income, so federal deductions flow through automatically — and then it passed a law, HB25-1296, requiring the overtime deduction to be added back. There is no equivalent addback for tips.
The practical result: a Colorado server saves real money on their state return, and a Colorado factory worker on overtime saves none. Same state, same year, opposite outcome.
A follow-up bill, SB26-056, would have narrowed the overtime addback to a single year. It failed in Senate Appropriations in May 2026, so the broader rule stands.
Iowa shows what the same mechanism looks like when a state does nothing at all. It also starts from federal taxable income, and its tax law tracks the federal code as it changes rather than freezing on a date. So both deductions arrived on their own, and Iowa has passed no law taking either back. A tipped worker in Iowa saves 3.8% of their tips on the state return without a single word of Iowa legislation having been written about it.
Why states diverge at all
States build their income tax on the federal system but choose how closely to follow it. Some start from federal taxable income, which already reflects federal deductions — those states inherit new deductions by default and have to legislate if they want to opt out. Most start from federal adjusted gross income and apply their own deductions, so a new federal deduction does nothing for them unless the state legislates it in.
The tips and overtime deductions arrived in mid-2025, after most legislatures had finished for the year. Absent a specific law, the default in an AGI-base state is that nothing changed.
Oregonis what the exception looks like. It starts from federal AGI, so neither deduction could reach it on its own — and Oregon wrote them in anyway, as subtractions of its own. Its guidance says you may claim “the same deductions for tip income, overtime wages, and passenger vehicle loan interest that you’re claiming on your federal return.” No smaller state cap: whatever the federal return allows, Oregon allows.
With a catch worth knowing about. Oregon also lets you subtract the federal income tax you actually paid. Claiming the tips deduction cuts that federal bill, which shrinks the subtraction, which hands a little of the gain back. You still come out ahead — just by less than the headline suggests. Missouri and Alabama have the same kind of rule without following the deductions at all, so there the effect runs entirely the wrong way.
What it costs you
Take a server with $20,000 in tips in a state with a 5% income tax that does not conform. The federal deduction removes that $20,000 from the federal base, worth roughly $2,400 at a 12% marginal rate. The state still taxes it — about $1,000. The headline said the tips were untaxed; nearly a third of the tax on them never went anywhere.
The states where the question does not arise
9 states do not tax wage income at all, so conformity is irrelevant there: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming. If you work in one of these, the federal deduction is the whole story and you keep all of it.
Why most states above say “not verified yet”
Because we cannot yet stand behind an answer for them. State conformity is genuinely in flux, several legislatures are still moving on it, and a confident 50-state table with three wrong rows is worse than no table.
States are added one at a time, each checked against that state’s own revenue department or legislature and covered by tests before it appears. So far that is 28 verified taxing states plus the 9 with no wage tax. The rest will follow.
If you want a particular state prioritised, tell us — it genuinely affects the order.