Does New York follow the federal no-tax-on-tips and overtime deductions?
SPLIT (tips: conforms from TY2026; overtime: does not conform; neither for 2025)
New York's position is split — by deduction, by tax year, or both. Read the per-deduction table and the state's own words below carefully before assuming either deduction applies to your state return. The federal deduction on Schedule 1-A is separate and unaffected.
Verified against the official state source below — last verified October 26, 2026
| Deduction | New York position |
|---|---|
| Federal tips deduction (IRC §224) | Does not conform 2025; conforms 2026+ |
| Federal overtime deduction (IRC §225) | Does not conform |
What the state itself says
- Official source
- S.9009-C / A.10009-C (2026–27 enacted budget bill), Part B — official NY State Assembly bill page (passed both houses 05/27/2026; signed Chap. 59 on 05/28/2026)
- Tax years covered
- Tips subtraction applies to taxable years beginning on or after January 1, 2026 (capped at the federal amount, so it tracks the §224 window). No New York benefit for 2025; no overtime provision for any year.
New York starts from federal AGI, and the Department of Taxation and Finance stated in its official 2026–27 Executive Budget tax materials that "the design of the federal deduction does not allow the benefit to flow through to the state level" — tips therefore required, and received, a separate state subtraction statute; no statute or guidance adopts the overtime deduction (§225). Verification note: the official 2025 Form IT-225 instructions (tax.ny.gov) were checked directly and contain NO subtraction modification for qualified tips or qualified overtime for 2025 — an earlier research draft suggesting an IT-225 overtime line was discarded as unverified.
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.