Does Arizona follow the federal no-tax-on-tips and overtime deductions?
CONFORMS (both, via enacted state subtractions)
Arizona follows the federal deductions, so qualified tips and overtime are deductible for state income tax as well as federal, subject to the details and years in the state's own guidance below. You still claim the federal deduction on Schedule 1-A first.
Verified against the official state source below — last verified October 26, 2026
| Deduction | Arizona position |
|---|---|
| Federal tips deduction (IRC §224) | Conforms (state subtraction) |
| Federal overtime deduction (IRC §225) | Conforms (state subtraction) |
What the state itself says
- Official source
- HB 4168, 57th Legislature, 2nd Regular Session (amending A.R.S. §43-1022) ; ADOR release, "ADOR Outlines Executive Order and 2025 Tax Year Income Tax Forms"
- Tax years covered
- Taxable years beginning from and after December 31, 2024 (TY2025 onward).
Arizona starts from federal AGI, so ADOR first built both subtractions into the 2025 forms under Executive Order 2025-15 and HB 4168 then codified them. Caveat: the chaptered bill text was corroborated via ADOR's own forms guidance; the azleg.gov text read was the House version.
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.