AR
Does Arkansas tax tips and overtime?
The federal deduction and the Arkansas deduction are separate questions. Here is where Arkansas actually lands, and why.
How Arkansas builds its tax base
Arkansas calculates its own tax base rather than importing a federal figure, so the federal deduction never enters the computation at all. Any relief here is a state provision in its own right, with its own rules and limits.
Tips in Arkansas
Still taxedArkansas builds its own income base rather than importing a federal figure — Form AR1000F Line 8 instructs the taxpayer to 'Add the wages, salaries, tips, etc. reported on your W-2(s),' and the 2025 DFA instruction booklet contains no reference at all to federal adjusted gross income or federal taxable income. Tips therefore remain in the Arkansas base as W-2 wages, and Arkansas has enacted no subtraction corresponding to IRC §224. The booklet's 'Special Information for Tax Year 2025' section lists no tips provision.
Source: Arkansas DFA — 2025 AR1000F and AR1000NR Forms and Instructions (Line 8; Special Information for Tax Year 2025) · last reviewed
Overtime in Arkansas
Still taxedArkansas uses selective, fixed-date IRC conformity and did not adopt IRC §225. The word 'overtime' does not appear anywhere in the 2025 AR1000F/AR1000NR instruction booklet — there is no line, schedule, or adjustment for it, and no add-back is needed because the federal deduction never enters the Arkansas computation. HB 1822 of 2025 (the 'Overtime but not Overtaxed Act,' Rep. Underwood) would have exempted FLSA overtime beginning TY2026 but died in House Revenue and Taxation at sine die in May 2025. The 2026 fiscal/special session cut rates (top individual rate to 3.7%, ~$192M package signed May 7, 2026) but enacted no tips or overtime deduction.
Source: Arkansas DFA — 2025 AR1000F and AR1000NR Forms and Instructions (no overtime provision); AR HB 1822 (2025) died in committee · last reviewed
Whatever your state does, your payroll taxes do not change
Both deductions reduce income tax only. Social Security and Medicare are still charged on the same wages, in every state.