Does Illinois Tax Tips & Overtime? OBBBA Conformity Guide

Illinois collects income tax from more than six million residents, and none of them get a state-level version of the OBBBA's “no tax on tips” or “no tax on overtime” deductions. But Illinois taxes income differently than California or New York — it uses a single flat rate instead of climbing brackets, which changes how much extra state tax a tipped or overtime worker actually feels, whether they earn $30,000 or $300,000 in Peoria or Chicago.

Quick answer

As of June 2026, Illinois has not conformed to the OBBBA tips or overtime deductions, so both remain fully taxable on your state return. Because Illinois charges a flat 4.95% on all income, that extra state tax is the same percentage whether you earn $30,000 or $300,000 — unlike graduated states such as California and New York.

Does Illinois tax tips under the OBBBA?

Yes. Illinois has not adopted the OBBBA's no-tax-on-tips deduction. The same qualified tip income you deduct on your federal Schedule 1-A gets added back on your Illinois Form IL-1040 and taxed like any other wage income, at the state's flat rate.

According to this site's state conformity tracker, Illinois is marked not conformed for both tips and overtime, with data last verified June 21, 2026 — you can see the full detail on the Illinois state page. If you're not sure how the federal deduction itself works, including which tip income actually qualifies, the guide to claiming no tax on tips and overtime on your tax return walks through the federal side step by step.

Does Illinois tax overtime pay?

Yes, the same way. Illinois has not conformed to the OBBBA's no-tax-on-overtime deduction either, so the FLSA overtime premium — the extra half-time portion of time-and-a-half pay, not your full overtime wages — that you deduct federally (up to $12,500 if single or head of household, $25,000 if married filing jointly) gets added back and taxed on your Illinois return at the flat rate.

That's true no matter how large your federal deduction is, and no matter what Illinois does, FICA payroll tax — 6.2% for Social Security plus 1.45% for Medicare — still comes out of every tipped or overtime dollar. The OBBBA deductions only ever apply to income tax, federal or state; they never touch payroll tax.

Why Illinois's flat tax changes the math

Illinois is one of a shrinking number of states that tax all income at a single rate, no matter how much you earn. That structurally different setup shows up when you compare it with the other state guides on this site: California uses a graduated schedule where the marginal rate climbs as income rises (see does California tax tips and overtime), and New York layers its own graduated brackets under an added New York City tax (see does New York tax tips and overtime). In Illinois, a tipped worker in Springfield and a six-figure earner in Chicago's Loop pay the exact same 4.95% rate on every dollar of income — including the tips and overtime that remain taxable at the state level.

Maria tends bar in Springfield, earning $28,000 in wages plus $9,000 in tips for the year. David supervises a plant floor in Chicago, earning $125,000 in salary plus a $9,000 FLSA overtime premium from a stretch of mandatory double shifts. Both deduct their $9,000 federally under the OBBBA, so neither owes federal income tax on that money. But Illinois doesn't recognize either deduction: both add their $9,000 back on their Illinois return, and both pay 9,000 × 4.95% = $445.50 in additional state tax — the identical amount, even though David earns more than four times what Maria does. In a graduated-rate state, David's extra income would likely be taxed at a noticeably higher marginal rate than Maria's; in Illinois, the rate never moves.

That's the core trade-off of a flat tax: it doesn't punish David for earning more, but it also doesn't give Maria a lower rate for earning less. If you want to see exactly how the federal deduction plays out for your own tip or overtime income — including the phase-out that starts above $150,000 in MAGI for single filers ($300,000 for joint filers) — the calculator runs the numbers for your specific wages, filing status, and state.

How to plan for Illinois tax on your tips and overtime

Start with your withholding. Illinois employers withhold state tax at the flat 4.95% rate on your full wages, including tips and overtime, regardless of what you deduct federally — so most W-2 workers won't see a big Illinois surprise unless tip income was under-reported during the year. If you're self-employed or work multiple tipped jobs, you may need to adjust your quarterly estimated payments to cover the state-level tax on income that's now federally tax-free. For the fuller multi-state picture, including which states have conformed and which haven't, see the roundup of state tax rules for tips and overtime.

Frequently asked questions

Does Illinois have any version of the federal “no tax on tips” deduction?

No. Illinois has not passed conforming legislation for either OBBBA deduction. Every dollar of qualified tips and FLSA overtime premium that you exclude from federal taxable income under the OBBBA is added back on your Illinois Form IL-1040 and taxed at the state's flat 4.95% rate, the same as any other wage income.

Is Illinois's income tax rate really the same at every income level?

Yes. Illinois is a flat-tax state: every filer pays 4.95% of net income, whether they earn $20,000 or $2 million a year. There are no brackets and no higher marginal rate for higher earners, which differs from the federal system and from graduated states like California and New York.

Will Illinois conform to the OBBBA tip and overtime deductions in the future?

Possibly, but there's no indication of it as of this writing. States decide independently whether to conform to new federal deductions, and conformity status can change with each legislative session. Check this site's state conformity tracker periodically, since it's updated as states pass new tax legislation.

Does Chicago add its own city income tax on top of the state rate?

No. Unlike New York City, Chicago and every other Illinois municipality are barred by the Illinois Constitution from levying their own local income tax without explicit authorization from the state legislature, which hasn't happened. A Chicago worker's state-level income tax is the same flat 4.95% as anywhere else in Illinois — there's no added city layer.

How much extra state tax will I owe on my Illinois tips and overtime?

Multiply your total qualified tips and FLSA overtime premium — the amounts you're excluding federally under the OBBBA — by 4.95%. That's your added Illinois state tax liability on that income, since none of it is deductible at the state level. A worker with $10,000 in tips or overtime owes about $495 in state tax that the federal deduction alone doesn't cover.

Sources

This site's state conformity tracker (last verified June 21, 2026); IRS, One Big Beautiful Bill Act: tax deductions for working Americans and seniors; Illinois Department of Revenue, Income Tax Rates. Conformity status and tax rates can change — verify current figures with these sources directly.

Two more states in this series: see does Pennsylvania tax tips and overtime and does Colorado tax tips and overtime.

This article is general information, not tax advice. The figures and rules are estimates based on current IRS and Illinois Department of Revenue guidance and can change. For your situation, consult a qualified tax professional or the Illinois Department of Revenue directly. Last reviewed July 13, 2026.