New York · The Tips Subtraction
New York wrote its own $25,000 tips break — because the federal one couldn't reach your NY return.
The federal 'no tax on tips' deduction is below-the-line, so it never touches New York AGI. New York responded with its own subtraction modification, effective for 2026.
Does the federal 'no tax on tips' deduction reduce my New York tax?
Commonly misreportedNot by itself. The federal deduction (IRC §224, enacted by the OBBBA) is below-the-line, and New York conformity operates at the AGI line — so the federal deduction alone would leave your New York taxable income unchanged.
What did New York enact instead?
A parallel subtraction modification: Tax Law §612(c)(48) lets you subtract qualified tips — to the extent allowable under IRC §224 — up to $25,000, for taxable years beginning on or after January 1, 2026. It piggybacks on the federal definition of qualified tips while delivering the benefit inside New York's own computation.
Anything to watch out for?
Two things: the ERA GATE — the subtraction starts with tax years beginning in 2026, so it does not help 2025 returns; and a drafting quirk — §612(c) currently contains three separate paragraphs numbered (48) covering different subjects, so make sure you (or your software) apply the TIPS paragraph, not one of its neighbors.
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Tax intelligence, not tax advice. Every answer above cites primary law you can check; a qualified professional should review your specific situation before filing. TaxPulse — a PulseNetwork intelligence engine.