Does ArizonaTax Tips & Overtime After the OBBBA?
Arizona conforms to the federal deductionfor the federal OBBBA tip and overtime deductions. Here's what that means for your paycheck.
Compiled by Sharon Ben-Moshe · Conformity data verified August 1, 2026
Quick answer
Arizona has a state income tax (about 2.5% used for estimates) and currently conforms to the federal deduction. That means your tips and overtime are exempt at the state level too.
Tips deduction
Conformed
Overtime deduction
Conformed
Details for Arizona
Arizona HB 4168 (signed June 13, 2026) created state subtractions mirroring the federal qualified-tips and qualified-overtime deductions, retroactive to tax years beginning after Dec. 31, 2024.
Last verified August 1, 2026.
How OBBBA tips & overtime work in Arizona
The OBBBA is a federal deduction: eligible workers can deduct up to $25,000 of tips and $12,500 of overtime premium ($25,000 if married filing jointly) from federal taxable income through 2028. Whether Arizona follows suit depends on state conformity. FICA (Social Security and Medicare) applies everywhere. Learn more about the tip deduction and the overtime deduction.
How this is sourced: Arizona's conformity status is tracked against state legislation and primary IRS guidance, and re-verified as the law changes. See our methodology and sources.