Does Ohio Tax Your Tips and Overtime in 2026?

Ohio's income tax return starts from your federal adjusted gross income, which usually means new federal tax breaks show up automatically on the state side too. The OBBBA's tips and overtime deductions are the exception — they were built to skip AGI entirely, so Ohio's conformity doesn't reach them. Two bills would fix that with a dedicated state exemption. As of August 2026, neither has passed.

Quick answer

Yes — Ohio currently taxes both your tips and your overtime premium in full. There's no state-level version of the OBBBA deductions yet: House Bill 209 (tips) and House Bill 39 (overtime) have each had committee hearings but remain pending, not enacted, as of this writing. Whatever tip and overtime income you have left after the state exemption is taxed at Ohio's new flat 2.75% rate for 2026, on income above $26,050 — plus your city's own municipal income tax, if you live or work somewhere that levies one.

Does Ohio tax tips under the OBBBA?

Yes, for now. House Bill 209, introduced by state Rep. Brian Lorenz (R-Powell), would exempt tips from Ohio's state, municipal, and school district income taxes alike — going further than most states' conformity bills, which only touch the state return. The Legislative Service Commission estimates it would cost Ohio roughly $50 million in lost revenue in tax year 2027 alone. The bill has had committee hearings in the House Ways and Means Committee but has not been voted out of committee or scheduled for a floor vote.

This site's state conformity tracker lists Ohio's tips status as pending for exactly this reason. See the full detail on the Ohio state page.

Does Ohio tax overtime pay?

Yes. House Bill 39 would create a state deduction for qualified overtime wages, mirroring the federal OBBBA rule that only the FLSA overtime premium — the extra half-time on top of your regular rate — would qualify. It was introduced in February 2025 and got a first hearing in the House Ways and Means Committee on April 2, 2025. Like HB 209, it has stalled there; it has not advanced to a vote.

Until one of these bills actually passes, every dollar of FLSA overtime premium you deduct federally is added back on your Ohio return and taxed at the state's flat rate — plus FICA payroll tax (6.2% Social Security, 1.45% Medicare), which no deduction at either level ever touches.

Why "starts from federal AGI" doesn't help here

This is the detail that trips people up. Ohio (like most states) builds its own tax base on top of your federal adjusted gross income — Form 1040, line 11. In a normal year, that means any new federal deduction that lowers AGI lowers Ohio's starting number too, automatically, with no action from the legislature.

The OBBBA tips and overtime deductions don't work that way. The IRS built them as a new category of deduction claimed on Schedule 1-A, which flows to Form 1040, line 13b — after AGI is already locked in. The IRS is explicit that Schedule 1-A "reduce[s] taxable income appropriately" rather than adjusting AGI itself. Your federal AGI is exactly the same whether or not you claim the deduction, so a state that piggybacks on federal AGI — like Ohio — gets none of the benefit unless it writes its own, separate exemption into state law. That's precisely what HB 209 and HB 39 are trying to do.

Ohio's new flat tax, and local tax on top

Separately from OBBBA conformity, Ohio simplified its own income tax for 2026: the graduated bracket system collapsed into a flat 2.75% rate on adjusted income above $26,050, with nothing owed on income at or below that threshold. That rate applies uniformly to wages, tips, and overtime pay alike — there's no separate, higher rate for tip income specifically.

Most Ohio cities and school districts also levy their own municipal income tax, collected through RITA or CCA, typically in the 1.5%–2.5% range (up to 3% in a handful of cities). That local tax applies to tip and overtime income the same as any other wages, and is entirely separate from both the state OBBBA conformity question and the flat-rate change — check your specific city's rate, since it varies by where you live and work.

Priya waits tables in Columbus, earning $28,000 in wages plus $9,000 in qualified tips and $3,000 in FLSA overtime premium. Federally, she deducts the full $12,000 under the OBBBA and owes no federal income tax on it. On her Ohio return, none of that $12,000 is exempt — it's added back and taxed at the 2.75% state rate ($330), plus Columbus's 2.5% municipal tax ($300) since she lives and works in the city. Her tips and overtime are tax-free federally but cost her about $630 in combined state and local tax.

What would change this

Both HB 209 and HB 39 would need to clear the House Ways and Means Committee, pass the full House and Senate, and be signed by the governor before Ohio's tip and overtime income becomes state (and, for tips, local) tax-free. Ohio's legislative session runs on a two-year cycle, so either bill could still move before the 136th General Assembly ends — or die in committee like many bills do. Watch this site's state conformity tracker for updates.

Ohio's situation is closer to Illinois's than Colorado's: no automatic pass-through, and no addback mechanic either, because there's simply nothing at the state level to add back yet. Run your exact numbers, federal and Ohio combined, with the Tips & Overtime Calculator.

Frequently asked questions

Does Ohio have its own version of no tax on tips or overtime?

Not yet. House Bill 209 (tips) and House Bill 39 (overtime) have each had committee hearings in the Ohio House but have not passed as of August 2026. Until one is enacted, both stay fully taxable in Ohio.

Ohio starts from federal AGI — why doesn't that cover the OBBBA deductions?

Because the OBBBA tips and overtime deductions are claimed on Schedule 1-A and reported on Form 1040, line 13b — after AGI is already calculated. They reduce your federal taxable income, not your AGI, so a state that conforms to federal AGI (like Ohio) never actually sees the deduction flow through.

What tax rate applies to my tips and overtime in Ohio right now?

Ohio's flat 2.75% state rate applies to adjusted income above $26,050 for 2026, with no separate rate for tip or overtime income. If you live or work in a city with its own municipal income tax — most do — that local rate (commonly 1.5%–2.5%) applies on top.

Would HB 209 also exempt my tips from local city tax?

If enacted as written, yes — HB 209 would amend Ohio's municipal and school district income tax statutes as well as the state code, exempting tips at all three levels. That's broader than most other states' tip-conformity proposals, which typically address only the state return.

Does FICA tax still apply to my Ohio tips and overtime?

Yes, regardless of what happens with Ohio's bills or the federal deduction. Social Security (6.2%) and Medicare (1.45%) payroll tax apply to all reported tip and overtime income — the OBBBA deductions only ever affect income tax, federal or state, never FICA.

Sources

This site's state conformity tracker (last verified August 1, 2026); Ohio House Bill 209, 136th General Assembly; Ohio House Bill 39, 136th General Assembly; IRS, Schedule 1-A, Additional Deductions; Policy Matters Ohio, The Great Ohio Tax Shift, 2026; NBC4 WCMH-TV, Ohio bill would exempt tips from state, local taxes. Bill status can change with any legislative session — verify current status with the Ohio General Assembly directly.

This article is general information, not tax advice. Figures reflect guidance available as of August 2026 and can change. Consult a qualified tax professional or the Ohio Department of Taxation for your situation. Last reviewed August 10, 2026.