States / Indiana
IN state income tax · checked October 14, 2026
Does Indiana tax tips and overtime?
For 2026 only, Indiana allows deductions that match the federal tips and overtime deductions. 2025 returns get nothing.
| Indiana return | Tips | Overtime |
|---|---|---|
| 2025 | Taxed | Taxed |
| 2026 | Not taxed (follows federal) | Not taxed (follows federal) |
The details
SEA 243 (2026) created Indiana deductions for qualified tips, qualified overtime, and qualified passenger vehicle loan interest. The Department of Revenue says they are in place only for the 2026 tax year.
The Indiana deduction starts from the federal amount (Schedule 1-A line 13 for tips) and can’t exceed it. If part of the income is exempt from Indiana or local tax, the deduction is prorated.
The federal deductions apply either way. See who qualifies for no tax on tips, how the overtime deduction works, and where both go on Schedule 1-A.
States with the same 2026 treatment
All 50 states and D.C. · Illinois · Iowa
Questions
Does Indiana tax tips in 2026?
For 2026, Indiana doesn’t tax the qualified tips you deduct on your federal return.
Does Indiana tax overtime in 2026?
For 2026, Indiana doesn’t tax the qualified overtime you deduct on your federal return.
What about my 2025 Indiana return?
For 2025, Indiana taxes tips in full. For 2025, Indiana taxes overtime in full.
Does the federal deduction still apply?
Yes. Whatever your state does, you can still claim the federal deductions on Schedule 1-A if you qualify: up to $25,000 of qualified tips per return and up to $12,500 of qualified overtime ($25,000 joint), phasing down above $150,000 of MAGI ($300,000 joint).