Does Pennsylvania follow the federal no-tax-on-tips and overtime deductions?
DOES NOT CONFORM
Pennsylvania 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 Pennsylvania 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 | Pennsylvania position |
|---|---|
| Federal tips deduction (IRC §224) | Does not conform |
| Federal overtime deduction (IRC §225) | Does not conform |
What the state itself says
"the term "compensation" includes salaries, wages, commissions, bonuses and incentive payments whether based on profits or otherwise, fees, tips, and similar remuneration"
- Official source
- Pennsylvania Department of Revenue, PA Personal Income Tax Guide, "Gross Compensation" (pa.gov)
- Tax years covered
- Standing Department guidance (2025 filing season and ongoing); no OBBBA-specific DOR bulletin was found.
Pennsylvania PIT is a standalone, class-based tax never computed from federal AGI or federal taxable income, so there is no conformity mechanism by which §§224/225 could flow in; under the Department's own definition, tips and wages (including overtime pay) remain fully taxable compensation, and PA law contains no equivalent deduction. Corroboration from the research pass: the Department's standing policy (REV-548, per secondary citation — not re-verified on pa.gov in this pass) is that Pennsylvania does not adopt the policy of the federal Internal Revenue Code.
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.