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As the tax-filing deadline nears, millions of Americans are expected to claim new federal income tax breaks for tips and overtime wages available for the first time under a wide-ranging tax law enacted by President Donald Trump.
But many people won’t get those same deductions when they fill out their state income tax forms. That is because it is up to each state to decide whether to match federal tax changes, and many have decided not to do so.
In states that don’t conform to the federal tax changes, workers who receive a federal tax deduction for tips or overtime still will owe state taxes on those earnings.
The tax-filing deadline is Wednesday for the federal government and most states. Here is what to know about state income tax rates and deductions:
41 states tax wages and salaries
In most states, individuals must fill out two separate tax forms. First, the federal income tax form. Then a state income tax form. The order matters, because most states use figures from the federal tax form as the starting point for their state tax calculations.
No income tax is levied in eight states — Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas and Wyoming. Washington state taxes income from capital gains but not wages and salaries. Missouri taxes income from wages and salaries but not capital gains.
Most states still tax tips and overtime wages
Only about a half-dozen states are mirroring Trump’s law by offering tax breaks on tips and overtime wages or for loan interest on new vehicles assembled in the U.S.
All three of those tax deductions are available to state income taxpayers in Idaho, Iowa, Montana, North Dakota and Oregon. Colorado offers the tips and auto loan deductions but not the overtime tax break. Alabama offers only the auto loan deduction.
Laws in several states automatically apply federal tax changes to state income taxes unless the governor and lawmakers opt out — like Colorado officials did on the overtime tax deduction. But in most states, the tax breaks are available only if officials updated their state laws, like they did in Idaho.
Arizona is an oddity on tax deductions
State income tax forms in Arizona list tax deductions for tips, overtime, auto loans and older residents based on a November executive order from Democratic Gov. Katie Hobbs. She assumed the Republican-led Legislature would later pass a bill putting the tax breaks into state law.
But Arizona law remains unchanged. Hobbs vetoed two tax-break bills because she objected to provisions that also would have adopted Trump’s corporate tax breaks. And lawmakers have not passed a third attempt.
