Hochul and Democratic New York lawmakers haven't formally adopted Trump's 'no tax on tips' policy

New York Governor Kathy Hochul and state Democratic lawmakers are facing growing criticism from restaurant workers and industry leaders after declining to align the state income tax code with a new federal provision that eliminates state taxation on tips and overtime pay.

The federal policy, included in President Donald Trump’s tax reform package known as the "One Big, Beautiful Bill," allows qualified service workers to deduct up to $12,500 in tips from their taxable income each year ($25,000 for married couples filing jointly) and extends a similar deduction for overtime earnings. The change is part of a suite of tax measures that take effect for tax years 2025–2028. 

While several states have moved to conform their tax codes to the federal changes, New York has so far declined to adopt the tip tax relief, leaving tipped workers to pay state income taxes on the same earnings that are exempted federally.

Service workers are voicing their frustration with New York not adopting the new policy, according to a report from New York Post.

“If we weren’t taxed on our tips, we’d be able to save more and maybe cut back on extra shifts,” said a Midtown bartender.