Federal dropped the tax on tips & overtime — but your state probably didn’t
The One Big Beautiful Bill Act (OBBBA) created federal deductions that zero out federal income tax on qualified tips and on the overtime premium for 2025–2028. The headlines made it sound like that income became tax-free. For most workers, it didn’t — because state income tax is a separate system, and about 41 states still treat tips and overtime as ordinary taxable wages.
This calculator answers the question the headlines skip: after the federal break, how much does my state still take? It stacks your tips and overtime on top of your base wages and applies your state’s real 2026 brackets, so the result is your marginal state tax on that income — the number that actually lands on your state return.
The nine states that don’t tax tips or overtime
If you live in one of these, your tips and overtime carry no state income tax — the federal break makes them fully tax-free at the income-tax level:
| No state wage income tax |
|---|
| Texas · Florida · Washington · Nevada · Tennessee · Wyoming · South Dakota · Alaska · New Hampshire* |
*New Hampshire taxes only interest and dividends, not wages.
How the calculation works
Because tips and overtime sit on top of your regular pay, the state tax they attract is the difference between the state tax on your base wages alone and the state tax on your base wages plus tips and overtime. That captures the correct marginal rate — if your tips push you into a higher bracket, this reflects it. We use each state’s 2026 brackets, flat rate, or standard deduction as applicable.
A note on state conformity
A handful of states start their tax calculation from your federal taxable income, which can automatically carry part of the federal exclusion through — and a few legislatures may pass their own relief. This tool takes the common, conservative path: it treats tips and overtime as ordinary state wages, which is correct for the large majority of states. Always confirm the final number with your state revenue department.
Frequently asked questions
Does my state tax tips and overtime in 2026?
If you’re in one of the nine no-income-tax states, no. In the other ~41 states (and D.C.), tips and overtime are generally taxed as ordinary wages even though the federal tax is gone. Pick your state above to see your number.
How is the state tax figured?
Your tips + overtime are stacked on your base wages and taxed at your marginal state rate. The tool computes state tax with and without that income and shows the difference, using 2026 state brackets.
Why do I still owe state tax if federal is zero?
Federal and state income taxes are separate. The OBBBA deduction only removes the federal income tax; unless your state adopts the same exclusion, the income stays taxable on your state return.
Is this exact?
It’s an accurate estimate of the state income-tax portion. It excludes FICA, local city taxes, and credits, and assumes no special state conformity relief. Confirm with your state revenue department or a tax professional.
Related calculators
No Tax on Tips calculator → · No Tax on Overtime calculator → — the federal side of the same change.