CT
Does Connecticut tax tips and overtime?
The federal deduction and the Connecticut deduction are separate questions. Here is where Connecticut actually lands, and why.
How Connecticut builds its tax base
Connecticut starts from your federal adjusted gross income. Both deductions are below-the-line — they reduce federal taxable income but leave AGI untouched — so neither reaches this state's return automatically. Anything you get here had to be legislated separately.
Tips in Connecticut
Still taxedCGS §12-701(a)(20) defines 'Connecticut adjusted gross income' as federal adjusted gross income with an enumerated list of modifications. Because IRC §224 is below-the-line, it never reduces federal AGI and so never reaches the Connecticut base — no decoupling legislation was needed, and Connecticut has added no subtraction modification for tips. Connecticut also allows no itemized deductions, closing the other possible route. HB 5010 (2026), 'An Act Exempting Tips or Gratuities and Overtime Pay from the Personal Income Tax,' received a Finance, Revenue and Bonding Committee hearing on Feb 27, 2026 (DRS fiscal estimate ~$200M/yr) but died; the session adjourned May 6, 2026 and the May 14, 2026 budget bill did not add the exemption.
Source: Conn. Gen. Stat. §12-701(a)(20); Connecticut General Assembly — HB 5010 (2026) bill status (died) · last reviewed
Overtime in Connecticut
Still taxedSame mechanism: IRC §225 is a below-the-line deduction that does not reduce federal AGI, and Connecticut's base is federal AGI plus/minus statutory modifications under CGS §12-701(a)(20), none of which reference qualified overtime compensation. HB 5010 (2026) would have exempted overtime pay but died in committee; the 2026 budget act (signed May 14, 2026) decoupled from certain other IRC provisions (e.g., §168(n)) without adding any tips/overtime relief. Overtime premium pay remains fully taxable for Connecticut income tax purposes.
Source: Conn. Gen. Stat. §12-701(a)(20); Connecticut General Assembly — HB 5010 (2026) bill status (died) · 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.