States / North Carolina
NC state income tax · checked October 14, 2026
Does North Carolina tax tips and overtime?
Yes. North Carolina taxes tips and overtime in full; the federal deductions don’t carry over to the North Carolina return.
| North Carolina return | Tips | Overtime |
|---|---|---|
| 2025 | Taxed | Taxed |
| 2026 | Taxed | Taxed |
The details
North Carolina’s 2026 conformity update (S 595) advanced its conformity date but decoupled from the federal tips, overtime, car loan interest, and senior deductions.
The federal deductions are taken after adjusted gross income, on Schedule 1-A, so a state that starts from federal AGI or computes its own income doesn’t pick them up unless its legislature adds a matching subtraction. We found no North Carolina law doing that for 2025 or 2026 as of October 2026.
The federal deductions apply either way. See who qualifies for no tax on tips, how the overtime deduction works, and where both go on Schedule 1-A.
States with the same 2026 treatment
All 50 states and D.C. · New York · North Dakota
Questions
Does North Carolina tax tips in 2026?
For 2026, North Carolina taxes tips in full.
Does North Carolina tax overtime in 2026?
For 2026, North Carolina taxes overtime in full.
What about my 2025 North Carolina return?
For 2025, North Carolina taxes tips in full. For 2025, North Carolina taxes overtime in full.
Does the federal deduction still apply?
Yes. Whatever your state does, you can still claim the federal deductions on Schedule 1-A if you qualify: up to $25,000 of qualified tips per return and up to $12,500 of qualified overtime ($25,000 joint), phasing down above $150,000 of MAGI ($300,000 joint).