MD
Does Maryland tax tips and overtime?
The federal deduction and the Maryland deduction are separate questions. Here is where Maryland actually lands, and why.
How Maryland builds its tax base
Maryland 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 Maryland
Still taxedThe Comptroller's Maryland Tax Alert on PL 119-21 (effective Jan. 6, 2026) states that the tips deduction "do[es] not impact FAGI" — Maryland's starting point — and that these "are federal deductions... not reported on the Maryland return because they do not affect the calculation of an individual taxpayer's FAGI" and "cannot be claimed as an itemized deduction on the Maryland return"; no conforming legislation was enacted in the 2026 session.
Source: Comptroller of Maryland, Maryland Tax Alert: Maryland Impacts of the One Big Beautiful Bill Act (PL 119-21), effective January 6, 2026, Part V · last reviewed
Overtime in Maryland
Still taxedSame Tax Alert lists "income from overtime pay (IRC § 225; PL 119-21 § 70202)" among provisions that are not subject to automatic decoupling only because they do not affect FAGI and therefore "cannot be taken as deductions on Maryland returns"; a 2026 bill that would have created an express state subtraction for §225 overtime, HB 1035, was heard in House Ways & Means on Feb. 26, 2026 and died there.
Source: Comptroller of Maryland, Maryland Tax Alert on PL 119-21 (Jan. 6, 2026), Part V; Maryland General Assembly, HB 1035 (2026 RS) bill status · 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.