Does Alabama follow the federal no-tax-on-tips and overtime deductions?
DOES NOT CONFORM
Alabama does not follow the federal deductions for state income tax. You can still claim the tips and overtime deductions on your federal return (Schedule 1-A) — they simply do not reduce your Alabama state tax. Do not assume your state return treats this income the way your federal return does.
Verified against the official state source below — last verified October 26, 2026
| Deduction | Alabama position |
|---|---|
| Federal tips deduction (IRC §224) | Does not conform |
| Federal overtime deduction (IRC §225) | Does not conform |
What the state itself says
- Official source
- Alabama Department of Revenue, "The One, Big, Beautiful Bill Act Analysis and Tax Provisions Executive Summary" (Oct 31, 2025; updated Nov 10, 2025) (landing page: https://www.revenue.alabama.gov/tax-policy/obbba/)
- Tax years covered
- 2025–2028 analysis window.
Alabama conforms selectively, provision by provision, and its individual tax is not tied to federal taxable income; ADOR expressly marks both §224 and §225 "Tied to Federal: No." *Unverified pointer: non-official trackers report a later standalone Alabama overtime deduction (cited as Act 2026-604, $1,000 cap, TY2026–2028) — a separate state deduction, not conformity; verify on an official Alabama source before using.*
Your federal deduction is separate
Whatever your state does, the federal deductions run on their own rules: check your W-2 codes with the W-2 Code Checker, estimate with the Tips Calculator and Overtime Calculator, and see the glossary for any term. All state positions: the state-by-state index.
State position verified October 26, 2026 from the official source above. State guidance changes; confirm on the source before filing. This page is general information, not tax advice.