WI
Does Wisconsin tax tips and overtime?
The federal deduction and the Wisconsin deduction are separate questions. Here is where Wisconsin actually lands, and why.
How Wisconsin builds its tax base
Wisconsin 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 Wisconsin
Still taxedStated outright by the Department of Revenue: 'Federal OBBB - No tax on tips: WI has not adopted this new federal deduction.' Two reinforcing reasons. (1) Wisconsin has static IRC conformity — 'Wisconsin follows the IRC as of December 31, 2022, with certain exceptions' and 'has not adopted provisions in the federal One Big Beautiful Bill (OBBB)' — so IRC Sec. 224 is not in Wisconsin's Code at all. (2) Wisconsin adjusted gross income is federal AGI with Wisconsin modifications (Wis. Stat. Sec. 71.01(13)), and Wisconsin applies its own standard deduction, so a below-the-line federal deduction could not flow through even under rolling conformity. Wisconsin's legislature tried to create a state equivalent: SB 36 would have exempted up to $25,000 of qualified tips, but Gov. Evers vetoed it on April 3, 2026.
Source: Wisconsin Department of Revenue, 2025 Wisconsin Tax Update Presentation (slides 'Internal Revenue Code — Tax Year 2025 Overview' and 'Federal OBBB — No tax on tips'); veto of 2025 SB 36 reported April 2026 · last reviewed
Overtime in Wisconsin
Still taxedAlso stated outright by the Department of Revenue: 'Federal OBBB - No tax on overtime: Wisconsin has not adopted this new federal deduction.' Same December 31, 2022 static conformity date excludes IRC Sec. 225, and Wisconsin's AGI-based starting point would block a below-the-line deduction regardless. The state-level substitute, AB 461 (companion SB 454), which would have created a Wisconsin individual income tax exclusion for overtime pay, passed the Assembly in January 2026 but was vetoed by Gov. Evers on April 3, 2026, so no Wisconsin overtime exclusion exists.
Source: Wisconsin Department of Revenue, 2025 Wisconsin Tax Update Presentation, slide 'Federal OBBB — No tax on overtime: Wisconsin has not adopted this new federal deduction'; veto of 2025 AB 461 reported April 2026 · 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.