Overview
- The federal law lets qualified workers deduct up to $12,500 in annual tip income and $12,500 in overtime pay through 2028, or $25,000 each for married couples filing jointly.
- New York has not conformed its tax code to those provisions, leaving state income taxes in place on tips and overtime despite the new federal deductions.
- A Tax Foundation analysis cited in coverage estimates New York could forgo as much as $1.7 billion in revenue if it adopts the deductions.
- Treasury Secretary Scott Bessent criticized several Democratic-led states, including New York and Illinois, for what he called deliberate blocking of the tax changes.
- Only a small group of states are currently on track to allow residents to benefit in 2026, with Michigan enacting the breaks and Colorado saying its rolling conformity will incorporate many federal changes.