If you work overtime in Massachusetts, or you earn tips, you have probably heard that those wages are no longer taxed. That is half true, and the missing half is going to surprise a lot of people next filing season.
The federal deductions are real. Massachusetts does not follow them. The Department of Revenue said so directly in a technical information release issued on June 23, 2026, and the state has now built a mechanism to keep saying so automatically.
What the federal law actually does
The 2025 federal reconciliation act created two new deductions, and neither one makes the income tax-free.
Tips. A new section of the Internal Revenue Code allows a deduction of up to $25,000 in qualified tips. It phases down by $100 for every $1,000 of modified adjusted gross income above $150,000, or $300,000 on a joint return.
Overtime. A parallel provision allows up to $12,500, or $25,000 on a joint return, with the same phasedown structure.
Both are deductions against federal taxable income rather than exclusions from wages. Your employer still withholds. Payroll taxes still apply. And both provisions expire for tax years beginning after December 31, 2028, so this is a four-year window, not a permanent change.
Why Massachusetts is different
Massachusetts does not automatically inherit federal tax changes. Under G.L. c. 62 § 1(c), the state determines personal income under the Internal Revenue Code as it existed on January 1, 2024. Anything Congress added afterward does not flow through unless the Legislature adopts it.
The Legislature did not adopt these. In TIR 26-4, DOR published a conformity chart running provision by provision, and for personal income tax purposes the answer on the consumer-facing items is no across the board:
- No tax on tips: not adopted
- No tax on overtime: not adopted
- Car loan interest deduction: not adopted
- The increased SALT cap: not adopted
- Qualified business income deduction: not adopted
- Mortgage interest and casualty loss changes: not adopted
- Non-itemizer charitable deduction: not adopted
A few provisions did come through, mostly narrow ones: wagering losses, ABLE account contributions, 529-to-ABLE rollovers, and business meals. Several business provisions switch on for tax years beginning on or after January 1, 2027.
What this means on your return
Take a restaurant server in Boston earning $18,000 in tips. On the federal return, that income may be largely deductible under the new provision. On the Massachusetts return, all $18,000 remains taxable at the state rate.
Same math for a nurse or a tradesperson with $10,000 in overtime. Deductible federally within the caps, fully taxable by Massachusetts.
The practical risk is withholding. Someone who hears “no tax on overtime” and adjusts their W-4 accordingly may cover their federal liability and come up short on the state side, because Massachusetts withholding was never reduced. That gap shows up as a bill in April rather than a refund.
Massachusetts taxes personal income at 5%, with the 4% surtax applying above the annual threshold, which was $1,107,750 for tax year 2026. Personal exemptions are unchanged at $4,400 for single filers and $8,800 for joint filers, with the additional $700 exemption for filers 65 and older.
The rule that makes this permanent
Massachusetts went further this year and made decoupling the default.
A new section of G.L. c. 62C, effective for tax years beginning on or after January 1, 2026, provides that when Congress amends the Internal Revenue Code in a way that affects Massachusetts gross income or deductions, the change does not apply to the taxable year in which it was enacted or any earlier year. The only exception is if the Commissioner of Revenue determines, within 90 days, that the revenue impact is under $20 million. The Commissioner also has to post an estimated impact within 60 days of any federal amendment.
In other words, the default answer to “did Massachusetts adopt this new federal tax break” is now no, and the burden runs the other way.
What about the senior deduction?
The federal law also created a $6,000 deduction for individuals 65 and older, reduced by 6% of modified adjusted gross income above $75,000, or $150,000 on a joint return, and requiring a Social Security number. It applies to tax years beginning before January 1, 2029.
Massachusetts has its own $700 additional exemption for filers 65 and over, which is unrelated and unchanged. DOR’s conformity chart does not address the federal senior deduction at all, so we are not going to tell you how the state treats it. If it matters to your return, that is a question for a tax professional rather than an article.
Dates worth putting on the calendar
- September 15, 2026: third estimated payment for 2026 (Form 1-ES), and extended 2025 partnership returns
- October 15, 2026: extended 2025 individual returns. The extension was time to file, not time to pay, and it is only valid if 80% of the liability was paid by April 15
- October 31, 2026: quarterly withholding return for July through September
One deadline that catches people permanently: the senior circuit breaker credit must be claimed within three years of the return’s original due date, ignoring extensions. Miss that and the credit is gone. The tax year 2026 circuit breaker figures had not been published as of late August.
Common questions
Does Massachusetts tax tips?
Yes. Massachusetts did not adopt the federal tip deduction. Tip income remains fully taxable on your Massachusetts return even if it is deductible federally.
Does Massachusetts tax overtime?
Yes. The federal overtime deduction was not adopted by Massachusetts. Overtime wages are taxed by the state as ordinary income.
Is the federal no tax on tips permanent?
No. Both the tips and overtime deductions expire for tax years beginning after December 31, 2028 unless Congress extends them.
Why does Massachusetts not follow federal tax law?
Massachusetts determines personal income under the Internal Revenue Code as it stood on January 1, 2024, so later federal amendments require legislative adoption. A 2026 statute now makes non-conformity the automatic default unless the Commissioner of Revenue finds the revenue impact is under $20 million.
Should I change my withholding because of these deductions?
Be careful. The deductions reduce federal taxable income only. Massachusetts withholding was not reduced, so cutting your state withholding based on federal headlines can leave you owing at filing.
This article describes DOR guidance published as of August 2026 and is general information, not tax advice.