Texas Has No State Income Tax — How Much Do You Still Save from OBBBA?

Every state conformity story on this site is about whether a state chose to follow the federal OBBBA tip and overtime deductions. Texas skips that debate entirely. Texas has no state income tax at all, on tips, overtime, or anything else — so there's no state tax bill for the federal deduction to offset, and no conformity decision for the legislature to make.

Quick answer

In Texas, tip and overtime workers keep the full federal OBBBA deduction with zero state-level offset, because Texas has no state income tax to apply it against. That's different from a state "conforming" — Texas was never taxing this income at the state level in the first place, so there's nothing to give up. You still owe federal FICA on every dollar of tips and overtime, and the federal deduction still runs only through tax year 2028 unless Congress extends it.

Why the "conformity" question doesn't apply in Texas

"Conformity" is only a question for states that levy an income tax and then have to decide whether to follow a new federal deduction. Texas is one of a small group of states that never taxes wage income, so the question doesn't arise. On this site's state conformity tracker, Texas is marked with a distinct status — "no income tax" — rather than "conformed" or "not conformed," precisely because those labels describe a choice Texas doesn't have to make.

As of this site's last verification on June 21, 2026, Texas shows no state income tax for both tips and overtime. See the full record on this site's Texas state page.

What Texas tip and overtime workers actually save

A Texas worker's OBBBA savings are effectively just their federal savings, because there's no second state-level calculation to net against it. Under the federal rules, qualified tips are deductible above the line up to $25,000, and the overtime deduction covers only the FLSA overtime premium — the extra half-time on top of your regular rate, not your full time-and-a-half pay — capped at $12,500 for single filers and $25,000 for joint filers. Both deductions phase out by 6 cents for every dollar of modified adjusted gross income above $150,000 (single or head of household) or $300,000 (married filing jointly), and both are currently scheduled to sunset after tax year 2028 unless Congress extends them.

None of that changes because you live in Texas. What changes is what happens after the federal calculation: in a state with an income tax that hasn't conformed, that same tip or overtime income gets taxed again on the state return. In Texas, there's no state return line for it to reappear on.

The tradeoff: how Texas pays for having no income tax

None of this is free — Texas leans more heavily on property and sales taxes to fund state and local government instead of an income tax, so the absence of a state income tax on your paycheck isn't the whole household tax picture. That tradeoff is a separate question from OBBBA conformity, and it's worth weighing on its own terms rather than assuming a no-income-tax state is uniformly cheaper to live in.

How does Texas compare to California and New York?

It's a real contrast, not just a technicality. Both California and New York have state income taxes and have not conformed to the OBBBA tip and overtime deductions as of this site's most recent check — meaning workers in those states still owe state income tax on the same tips and overtime that are now deductible federally. A Texas server and a California server earning identical tips get the same federal tax break; only the Californian sees a state tax bill on top of it.

A few points of comparison worth knowing:

• California — has a state income tax and has not conformed; tips and overtime remain taxable on the state return. See does California tax tips and overtime in 2026 for the details.
• New York — also has a state income tax and has not conformed; New York City residents face a local income tax on top of that. See does New York tax tips and overtime in 2026 for the full picture.
• Texas — no state income tax, so there's no state-level tax on tips or overtime to conform or not conform in the first place.

For the full 50-state picture, including which states have conformed, which haven't, and which — like Texas — have no income tax at all, see this site's national state conformity roundup.

Say a Houston server reports $18,000 in qualified tips for the year and files single. Federally, she deducts the full $18,000 above the line (it's under the $25,000 cap) and, at a 22% marginal rate, saves roughly $3,960 in federal income tax. Because Texas has no state income tax, that's the end of the story — there's no second state tax bill on the same $18,000. A server with the exact same tip income in a non-conforming state with a state income tax would still owe state tax on that $18,000 even after claiming the identical federal deduction. Either way, FICA (7.65%, split between Social Security and Medicare) is still owed on all $18,000 regardless of state or the federal deduction.

Every worker's numbers are different depending on filing status, income level, and how much of their pay is tips versus overtime. Run your own figures through the OBBBA savings calculator to see your federal deduction, your phase-out status if your income is high, and confirmation that Texas adds no state-level offset.

Frequently asked questions

Has Texas conformed to the OBBBA tip and overtime deductions?

That's not quite the right question for Texas. Conformity describes a choice states with an income tax make about whether to follow a new federal deduction. Texas has no state income tax at all, so there's no state tax on tips or overtime for it to conform to — the deductions simply don't have a state-level counterpart to worry about.

Do I still get the federal OBBBA deduction if I live in Texas?

Yes. The federal tip and overtime deductions are claimed on your federal return regardless of which state you live in. Texas residency doesn't change your federal eligibility, your $25,000 tips cap, your overtime premium cap, or the income phase-out — it only means there's no separate state tax bill layered on top of that federal calculation.

Do I still owe any tax on my tips or overtime in Texas?

Yes, at the federal level. FICA — Social Security and Medicare tax, 7.65% combined for employees — still applies to all your tips and overtime pay regardless of the OBBBA deduction or which state you live in. The OBBBA deductions reduce federal income tax, not FICA. Texas simply has no additional state income tax layer on top.

Is Texas a better state financially than California or New York because it has no income tax?

For the specific question of OBBBA tips and overtime, yes — Texas workers keep more of that specific income than workers in a non-conforming income-tax state like California or New York. But that's one slice of a larger tax picture. Texas relies more on property and sales taxes to fund government instead of an income tax, so your total tax burden depends on your income, spending, and homeownership, not just this one deduction.

How long will the OBBBA tip and overtime deductions last?

As currently written, both deductions are scheduled to sunset after tax year 2028 unless Congress extends them. That timeline applies the same way in Texas as anywhere else — it's a federal expiration, not a state one. See when does no tax on tips and overtime end for the details.

Sources

IRS, One Big Beautiful Bill Act: tax deductions for working Americans and seniors. This site's state conformity tracker and Texas state page (last verified June 21, 2026). Texas has no state individual income tax; state and local tax rules can change — verify current status with the Texas Comptroller of Public Accounts and the IRS directly.

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