Does California follow the federal no-tax-on-tips and overtime deductions?
DOES NOT CONFORM
California 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 California 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 | California position |
|---|---|
| Federal tips deduction (IRC §224) | Does not conform |
| Federal overtime deduction (IRC §225) | Does not conform |
What the state itself says
Tips — "Does California Conform? No, with respect to the deduction on tips provisions." Overtime — "Does California Conform? No, with respect to the deduction for overtime pay provisions."
- Official source
- California Franchise Tax Board, "Summary of Federal Income Tax Changes" (analyses of P.L. 119-21 §§70201 and 70202)
- Tax years covered
- 2025 onward.
California conforms to IRC §63 as of the fixed specified date January 1, 2025 (SB 711) — before OBBBA's July 4, 2025 enactment; FTB states the changes "were added after January 1, 2025. As a result, California does not conform to the deduction for tips received" (and identically for overtime). California conforms only to the federal information-reporting provisions.
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.