Tax year 2026
The federal deductions do not reach your state return on their own. Most states charge tax on the same tips the federal government has stopped taxing.
This is the question almost everything written about “no tax on tips” gets wrong. The deduction is taken below your adjusted gross income, and most states start their calculation at adjusted gross income — so unless a state passed a law of its own, nothing changed there.
Of the 28 states we have checked and can calculate, 7 give you something on the state return. The rest tax those tips exactly as before.
Some legislated it deliberately. Others inherited it by accident of how their tax is built.
| State | Covers | How it happened |
|---|---|---|
| Colorado | Tips only | Automatically — it starts from federal taxable income |
| Georgia | Both | By its own law |
| Indiana | Both | By its own law |
| Iowa | Both | Automatically — it starts from federal taxable income |
| Michigan | Both | By its own law |
| North Dakota | Both | Automatically — it starts from federal taxable income |
| Oregon | Both | By its own law |
28 that charge income tax, plus 9 that charge none at all.
9 states, where the question does not arise. Tips and overtime are taxed federally there and nowhere else, so you keep the whole of the federal deduction.
We would rather leave a state out than publish a number we cannot stand behind. Each of these says why.
Figures on this page are for tax year 2026 and were last checked against the primary sources on 2026-07-31. See our sources. This is an estimate, not tax advice.