{"id":577609,"date":"2025-11-18T04:55:12","date_gmt":"2025-11-18T04:55:12","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/577609\/"},"modified":"2025-11-18T04:55:12","modified_gmt":"2025-11-18T04:55:12","slug":"no-tax-on-tips-or-overtime-not-if-you-live-in-these-states","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/577609\/","title":{"rendered":"No tax on tips or overtime? Not if you live in these states"},"content":{"rendered":"<p><img decoding=\"async\" style=\"position:absolute;top:0;left:0;right:0;bottom:0;width:100%;height:100%;z-index:2\" src=\"https:\/\/www.europesays.com\/uk\/wp-content\/uploads\/2025\/11\/82590202007-20250321-vpc-things-to-know-about-getting-your-taxes-done-on-time-thumb-getty-00-00-00-0.jpeg\"\/><img decoding=\"async\" class=\"vidplayicon\" src=\"https:\/\/www.gannett-cdn.com\/appservices\/universal-web\/universal\/icons\/icon-play-alt-white.svg\" alt=\"play\" style=\"height:40px;margin:auto 18px auto 27px;width:40px\"\/><\/p>\n<p>Tax Day is coming up on April 15 \u2014 what to know about filing<\/p>\n<p>Tax Day is coming up on April 15. Here are some tips for making the process as smooth as possible.<\/p>\n<p>An <a href=\"https:\/\/lims.dccouncil.gov\/downloads\/LIMS\/60658\/Introduction\/B26-0457-Introduction.pdf?Id=226369\" target=\"_blank\" rel=\"noreferrer noopener\">emergency bill<\/a> passed in Washington, DC, axing key tax breaks touted in the <a href=\"https:\/\/www.usatoday.com\/story\/news\/politics\/2025\/07\/04\/donald-trump-signs-megabill-taxes-medicaid-border\/84470497007\/\" target=\"_blank\" rel=\"noreferrer noopener\">One Big Beautiful Bill Act<\/a> for its residents highlights why Americans should pay attention to state tax laws, experts said.<\/p>\n<p>To address an <a href=\"https:\/\/www.dcfpi.org\/all\/dc-expected-to-lose-1-billion-in-revenue-through-the-financial-plan\/\" target=\"_blank\" rel=\"noreferrer noopener\">expected $1 billion revenue loss<\/a> over the next three years due to lost federal government-related jobs, Washington&#8217;s city council passed an emergency tax bill this month decoupling parts of its tax code from recent federal tax changes under <a href=\"https:\/\/www.usatoday.com\/news\/politics\/donald-trump\/\" target=\"_blank\" rel=\"noreferrer noopener\">President Donald Trump<\/a>&#8216;s signature tax and spending law. Among the changes, it&#8217;s removing local income tax savings tied to the new\u00a0<a href=\"https:\/\/www.usatoday.com\/story\/money\/2025\/07\/02\/trump-bill-no-tax-on-tips-explained\/84447598007\/\" target=\"_blank\" rel=\"noreferrer noopener\">no tax on tips deduction<\/a>\u00a0and the\u00a0<a href=\"https:\/\/www.usatoday.com\/story\/money\/personalfinance\/2025\/07\/17\/trump-one-big-beautiful-bill-tax-benefits\/85193287007\/\" target=\"_blank\" rel=\"noreferrer noopener\">$6,000 bonus senior deduction<\/a>. That means district residents who qualify for these federal tax breaks won&#8217;t be able to claim them on their local tax returns and will end up losing savings.<\/p>\n<p>While most Americans focus on federal tax laws, the Washington move shows why Americans will need to start paying more attention to state tax laws. States aren&#8217;t required to conform with all federal tax provisions. With <a href=\"https:\/\/www.usatoday.com\/story\/news\/education\/2024\/09\/03\/school-teachers-jobs-covid-relief\/74502849007\/\" target=\"_blank\" rel=\"noreferrer noopener\">COVID-era federal aid depleted<\/a>, the <a href=\"https:\/\/www.usatoday.com\/story\/money\/2025\/11\/10\/shutdown-end-without-aca-health-insurance\/87193808007\/\" target=\"_blank\" rel=\"noreferrer noopener\">economy uncertain<\/a>, and\u00a0states on the hunt for money, many states may look to shore up budgets by decoupling from federal tax laws.<\/p>\n<p>&#8220;The District of Columbia is not alone in assessing the costs of OBBBA conformity, with lawmakers across the country evaluating the trade-offs associated with adopting or decoupling from key provisions of the reconciliation act,&#8221; the Tax Foundation, a nonprofit research organization, <a href=\"https:\/\/taxfoundation.org\/blog\/dc-obbba-conformity\/\" target=\"_blank\" rel=\"noopener\">wrote<\/a>.<\/p>\n<p>What tax benefits are excluded in DC?<\/p>\n<p>Effective retroactively to January 1, 2025, the district voted to <a href=\"https:\/\/dccouncil.gov\/council-separates-elements-of-district-tax-code-from-the-federal-to-fund-family-tax-savings-and-youth-tax-credit-reinstates-temporary-juvenile-curfew\/\" target=\"_blank\" rel=\"noreferrer noopener\">temporarily suspend<\/a> multiple provisions in the law, which was <a href=\"https:\/\/www.usatoday.com\/story\/news\/politics\/2025\/07\/04\/donald-trump-signs-megabill-taxes-medicaid-border\/84470497007\/\" target=\"_blank\" rel=\"noreferrer noopener\">signed by Trump on July 4<\/a>, including:<\/p>\n<ul class=\"wp-block-list\">\n<li>Higher basic standard deductions<\/li>\n<li>Charitable contribution for non-itemizers<\/li>\n<li>Qualified small business stock exclusion<\/li>\n<li>No tax on tips<\/li>\n<li>No tax on overtime pay<\/li>\n<li>Personal car loan interest deduction<\/li>\n<li>Bonus $6,000 senior tax deduction<\/li>\n<\/ul>\n<p>The council&#8217;s emergency amendment applies for 90 days, with a planned temporary extension of 225 days. A permanent measure would have to go through the normal, lengthier permanent state legislative process, which would require more discussion and votes.<\/p>\n<p>By eliminating some of the tax provisions, the district may save $95 million in fiscal year 2025, and $567 million through fiscal year 2029, the Tax Foundation said.<\/p>\n<p>Some of the savings will be funneled to accelerate a full local match for the federal Earned Income Tax Credit and establishing a local child tax credit of $1,000 per child for eligible families, the council <a href=\"https:\/\/dccouncil.gov\/council-separates-elements-of-district-tax-code-from-the-federal-to-fund-family-tax-savings-and-youth-tax-credit-reinstates-temporary-juvenile-curfew\/\" target=\"_blank\" rel=\"noreferrer noopener\">said<\/a>.<\/p>\n<p>Still, residents who qualified for those tax breaks would lose out. A qualifying senior who can&#8217;t claim the extra $6,000 deduction on a tax return would lose $360 to $390, estimated Richard Pon, a San Francisco-based certified public accountant.<\/p>\n<p>What are other states doing?<\/p>\n<p>Washington isn&#8217;t alone in choosing to decouple from federal tax laws that could benefit individual taxpayers.<\/p>\n<p><a href=\"https:\/\/www.usatoday.com\/news\/politics\/donald-trump\/\" target=\"_blank\" rel=\"noreferrer noopener\">Trump<\/a>&#8216;s <a href=\"https:\/\/www.usatoday.com\/story\/graphics\/2025\/07\/04\/trump-big-beautiful-bill-tax-details-explained\/84461981007\/\" target=\"_blank\" rel=\"noreferrer noopener\">mega tax package<\/a> &#8220;is causing havoc on <a href=\"https:\/\/www.usatoday.com\/story\/money\/2025\/03\/11\/states-most-dependent-federal-revenue\/82224889007\/\" target=\"_blank\" rel=\"noreferrer noopener\">state budgets<\/a> as many conform to the Internal Revenue Code, and these states are seeing big drops in forecasted revenue,&#8221; Pon said.<\/p>\n<p>Other states that have moved to protect their budgets include:<\/p>\n<ul class=\"wp-block-list\">\n<li><strong>Colorado:<\/strong>\u00a0Rejected no tax on overtime pay. It will add a line to its state tax form for \u201cExcess federal deduction for overtime pay.\u201d Taxpayers must report the amount deducted federally and <a href=\"https:\/\/leg.colorado.gov\/bills\/hb25-1296\" target=\"_blank\" rel=\"noreferrer noopener\">add it back<\/a> for state purposes.<\/li>\n<li><strong>New York:<\/strong>\u00a0Will continue taxing tips and overtime pay by adding new codes for \u201cAdd-back of exempt tip income\u201d and \u201cAdd-back of exempt overtime pay\u201d on its\u00a0<a href=\"https:\/\/www.tax.ny.gov\/forms\/current-forms\/it\/it225i.htm\" target=\"_blank\" rel=\"noopener\">IT-225 form<\/a>.<\/li>\n<li><strong>Illinois:<\/strong>\u00a0Hasn&#8217;t adopted no tax on overtime and tips and will probably update\u00a0<a href=\"https:\/\/tax.illinois.gov\/forms\/incometax\/currentyear\/individual\/il-1040-schedule-m-instr.html\" target=\"_blank\" rel=\"noopener\">Schedule M<\/a>\u00a0to require add-backs for federally exempt\u00a0tip\u00a0and overtime income.<\/li>\n<li><strong>Maine<\/strong>: <a href=\"https:\/\/www.pierceatwood.com\/sites\/default\/files\/10.1.25_Governor&#039;s%20Instruction%20RE%20Conformity%202025%20(002)_0.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Rejected<\/a> the bonus senior deduction and deductions for car loan interest, tips and overtime<\/li>\n<\/ul>\n<p>&#8220;You must pay close attention to state adjustments for the next few years, as each state\u2019s approach differs,&#8221; said Eric Clements, director of Tax Compliance at Thomson Reuters. &#8220;This complexity makes <a href=\"https:\/\/www.usatoday.com\/story\/money\/taxes\/2025\/01\/28\/do-own-taxes-hire-pro-heres-what-consider\/77931131007\/\" target=\"_blank\" rel=\"noreferrer noopener\">DIY tax preparation<\/a> less\u00a0viable\u00a0for affected clients.&#8221;<\/p>\n<p>Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at\u00a0<a href=\"mailto:mjlee@usatoday.com\" target=\"_blank\" rel=\"noreferrer noopener\">mjlee@usatoday.com<\/a>\u00a0and\u00a0<a href=\"https:\/\/profile.usatoday.com\/newsletters\/the-daily-money\/\" target=\"_blank\" rel=\"noreferrer noopener\">subscribe to our free Daily Money newsletter<\/a>\u00a0for personal finance tips and business news every Monday through Friday morning.<\/p>\n","protected":false},"excerpt":{"rendered":"Tax Day is coming up on April 15 \u2014 what to know about filing Tax Day is coming&hellip;\n","protected":false},"author":2,"featured_media":577610,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5311],"tags":[3852,5176,42839,13236,5033,117937,3613,5177,1433,21092,1117,103982,91087,125730,149089,12261,5483,32,1700,9648,22300,22302,1234,2305,51706,97916,22720,6584,9641,4447,12,3577,3120,103985,5179,6591,34345,12717,46,285,38599,19131,182968,39769,111725,5199,72827,1200,3429,57135,51405,1523,1757,5181,49,978,659,19130,6709,11729],"class_list":{"0":"post-577609","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-united-states","8":"tag-act","9":"tag-and","10":"tag-beautiful","11":"tag-big","12":"tag-bill","13":"tag-citizens","14":"tag-colorado","15":"tag-columbia","16":"tag-coronavirus","17":"tag-coronavirus-covid-19","18":"tag-covid-19","19":"tag-credits","20":"tag-cuts","21":"tag-d-c","22":"tag-district","23":"tag-district-of-columbia","24":"tag-donald","25":"tag-donald-trump","26":"tag-economy","27":"tag-economy-news","28":"tag-fiscal","29":"tag-fiscal-policy-news","30":"tag-government","31":"tag-illinois","32":"tag-income","33":"tag-income-taxes","34":"tag-maine","35":"tag-negative","36":"tag-new","37":"tag-new-york","38":"tag-news","39":"tag-of","40":"tag-one","41":"tag-one-big-beautiful-bill-act","42":"tag-overall","43":"tag-overall-negative","44":"tag-overtime","45":"tag-planning","46":"tag-policy","47":"tag-politics","48":"tag-preparation","49":"tag-salaries","50":"tag-salaries-and-wages","51":"tag-senior","52":"tag-senior-citizens","53":"tag-state","54":"tag-state-income-tax","55":"tag-tax","56":"tag-tax-credits","57":"tag-tax-cuts","58":"tag-tax-preparation-u0026-planning","59":"tag-taxes","60":"tag-trump","61":"tag-u0026","62":"tag-united-states","63":"tag-us","64":"tag-usa","65":"tag-wages","66":"tag-washington","67":"tag-york"},"share_on_mastodon":{"url":"","error":"Validation failed: Text character limit of 500 exceeded"},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/577609","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=577609"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/577609\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/577610"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=577609"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=577609"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=577609"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}