Which States Don't Tax Tips in 2026? The Complete State-by-State Report
The federal $25,000 tip deduction applies in every state — but your state income tax is a separate decision. As of August 2026, 18 states don't tax tip income at the state level (9 with no income tax at all, 8 that conformed to the federal deduction, plus Georgia partially). The other 32 states + D.C. still tax tips. This report breaks down all 50 states, with tax rates and tipped minimum wages for each.
9 States With No Income Tax (Tips Never Taxed)
These states levy no broad individual income tax on wages. Tips are never touched at the state level — tipped workers here keep the full federal benefit.
| State | State Income Tax | Tipped Min. Wage | Avg Tips/Hour |
|---|---|---|---|
| Texas | None | $2.13 | $22 |
| Florida | None | $10.98 | $24 |
| Nevada | None | $11.88 | $26 |
| Washington | None | $16.66 | $26 |
| Tennessee | None | $2.13 | $22 |
| Alaska | None | $11.73 | $22 |
| New Hampshire | None on wages* | $7.25 | $19 |
| South Dakota | None | $5.75 | $17 |
| Wyoming | None | $2.13 | $17 |
*New Hampshire taxes interest and dividend income but not wages or tips.
8 States That Conformed to the Federal Deduction
These states adopted the OBBBA tip deduction for their own income tax. Most conform automatically through "rolling conformity" — their tax code follows federal taxable income by default. Arizona passed its own standalone law exempting tips entirely.
| State | How It Exempts Tips | State Tax Rate | Extra Savings on $20K Tips |
|---|---|---|---|
| Arizona | Own state law (tips fully exempt) | 2.5% | ~$500 |
| Idaho | Rolling conformity | 5.8% | ~$1,160 |
| Iowa | Rolling conformity | 3.8% | ~$760 |
| Michigan | Rolling conformity | 4.25% | ~$850 |
| Montana | Rolling conformity | 5.9% | ~$1,180 |
| North Dakota | Rolling conformity | 1.95% | ~$390 |
| Oregon | Rolling conformity | 9.9% | ~$1,980 |
| South Carolina | Rolling conformity | 6.4% | ~$1,280 |
"Extra savings" shows the state income tax you avoid on $20,000 of tip income, on top of the federal deduction. Oregon conformity is especially valuable — its 9.9% rate makes the state exemption worth nearly $2,000/year for a typical server.
Georgia partially conforms — check the Georgia state page for the current status before filing.
The 32 States + D.C. That Still Tax Tips
In these states, you get the federal deduction but still owe full state income tax on tip income. The largest states — California, New York, and Illinois — all chose to decouple, and Colorado actively legislated against conformity despite initially being expected to follow.
| State | Tax Rate on Tips | State Tax on $20K Tips |
|---|---|---|
| California | 9.3% | ~$1,860 |
| New York | 10.9% | ~$2,180 |
| Minnesota | 9.85% | ~$1,970 |
| New Jersey | 10.75% | ~$2,150 |
| Connecticut | 6.99% | ~$1,400 |
| Hawaii | 8.25% | ~$1,650 |
| Colorado | 4.4% (decoupled) | ~$880 |
| Illinois | 4.95% | ~$990 |
| Utah | 4.65% | ~$930 |
| West Virginia | 5.1% | ~$1,020 |
| Wisconsin | 7.65% | ~$1,530 |
| Maryland | 5.75% | ~$1,150 |
| Virginia | 5.75% | ~$1,150 |
| Ohio | 3.5% | ~$700 |
| Pennsylvania | 3.07% | ~$614 |
| Missouri | 4.8% | ~$960 |
Showing the 16 most populous taxing states. Every state has a dedicated calculator page — see the full state index.
What This Means in the Biggest States
California — Highest Tip Tax Burden in the Country
A Los Angeles server with $30,000 in tips saves roughly $6,600 federally but still pays about $2,790 in California state income tax on those tips. California has shown no movement toward conformity.
New York — Decoupled by Static Conformity
New York pins its tax code to the Internal Revenue Code as of a fixed date, so the OBBBA deduction simply doesn't exist for NY purposes. At 10.9%, NYC tipped workers face the combined effect of state tax plus city considerations.
Texas & Florida — Full Benefit, No State Tax
The two most populous no-income-tax states. A Dallas server with $30,000 in tips keeps the entire federal savings — no state clawback at all. Combined with the $2.13 tipped minimum wage, Texas tipped workers see the largest relative gain from the OBBBA.
Arizona — The Standout
Arizona didn't wait for federal conformity mechanics — it passed its own law exempting tip income from state tax directly. Combined with a relatively low 2.5% rate, Arizona is one of the most tip-friendly taxed states in America.
Real Numbers: Same Server, Different States
Take a full-time server earning $22,000/year in tips at the 22% federal bracket. Here's what she actually keeps, by state:
Same job, same tips — a $2,050/year difference between Texas and California purely from state treatment. Calculate your own numbers with the No Tax on Tips Calculator.
Frequently Asked Questions
Do I get the federal tip deduction even if my state taxes tips?
Yes. The federal $25,000 deduction applies in all 50 states. State conformity only affects your state income tax — the two are calculated independently.
Can my state change its mind later?
Yes — state legislatures can conform or decouple in any session. Rolling-conformity states track federal changes automatically; static states like New York require explicit legislation. This report reflects status as of August 2026; verify before filing.
Why did Colorado decouple?
Colorado initially appeared likely to conform (rolling-conformity state), but its legislature acted to preserve the state tax base on tips and overtime. Budget-heavy states facing revenue pressure — California, New York, Illinois — made the same choice.