Does New Jersey follow the federal no-tax-on-tips and overtime deductions?
DOES NOT CONFORM
New Jersey 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 New Jersey 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 | New Jersey position |
|---|---|
| Federal tips deduction (IRC §224) | Does not conform |
| Federal overtime deduction (IRC §225) | Does not conform |
What the state itself says
"the New Jersey Gross Income Tax (GIT) has defined categories of income and deductions and is not computed based on federal adjusted gross income."
- Official source
- NJ Division of Taxation, "One Big Beautiful Bill Act (OBBBA) and the New Jersey Gross Income Tax"
- Tax years covered
- 2025–2028 (as stated on the page).
New Jersey's Gross Income Tax uses its own statutory categories, so the federal deductions cannot flow through; the Division's OBBBA-specific page states expressly that the federal deductions for overtime, tips and senior citizens do not affect the NJ-1040 / NJ-1040NR / NJ-1041. (Form note from the research pass: New Jersey offers no line on which a §224/§225 amount could be entered; the resident return computes tax from New Jersey gross income, not federal AGI.)
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.