Wisconsin, Michigan, Indiana: OBBBA Conformity Resolved
The One Big Beautiful Bill Act created three new above-the-line deductions at the federal level: up to $25,000 for qualified tips, up to $12,500 for overtime premiums ($25,000 for joint filers), and a $6,000 bonus for seniors aged 65 and older. These deductions are guaranteed on your federal return. But whether they also reduce your state income tax depends on whether your state has conformed to the OBBBA changes. Three states were in limbo for months: Wisconsin, Michigan, and Indiana. All three are now resolved.
What conformity means for OBBBA deductions
State income tax conformity refers to whether a state adopts the federal Internal Revenue Code as the starting point for its own tax calculations. States handle this in different ways. Some adopt the IRC on a rolling basis, automatically picking up every federal change. Others use a fixed-date conformity model, where the state's tax code references the IRC as it existed on a specific date. A few states maintain their own tax code entirely and require separate legislation for each federal provision they choose to adopt.
For the OBBBA deductions, the distinction matters. If a state conforms to the IRC as of a date after the OBBBA was signed into law, the tips, overtime, and senior bonus deductions generally flow through to the state return. If the state's conformity date predates the OBBBA, those deductions do not apply at the state level unless the legislature passes an update.
Michigan: confirmed via H.B. 4961
Michigan's status is now resolved. Governor Whitmer signed H.B. 4961 on October 7, 2025, creating state income tax deductions for qualified tips and overtime compensation. The Michigan Department of Treasury followed up with a Taxpayer Notice on January 6, 2026 confirming the deduction details.
The Michigan deductions apply for tax years 2026 through 2028 and match the federal OBBBA limits. At Michigan's flat 4.25% rate, a worker deducting $20,000 in tips saves $850 in Michigan state tax on top of their federal savings. The Treasury Notice is the authoritative source for implementation details.
Indiana: confirmed via IB #128
Indiana's status is also resolved. The Indiana Department of Revenue published Income Tax Information Bulletin #128, providing deduction-specific guidance for the OBBBA tips and overtime deductions. Indiana also updated its IRC conformity date to January 1, 2026 (retroactively) via H.B. 1001.
Key details from IB #128: the deductions apply for tax year 2026 only and cannot exceed the federal allowable amount. Phase-outs apply at $150,000 MAGI for single filers and $300,000 for joint filers. The bulletin identifies 68 qualifying occupations across 8 categories for the tips deduction. At Indiana's flat 2.95% rate, a worker deducting $20,000 in tips saves $590 in state tax.
Wisconsin: vetoed - no conformity
Wisconsin's situation is now definitively resolved in the negative. Three independent barriers block the OBBBA deductions from applying on Wisconsin state returns:
- IRC conformity date: Wisconsin's conformity date remains December 31, 2022, well before the OBBBA was enacted in July 2025.
- SB 859 exclusion: The IRC update bill (SB 859) explicitly excludes the OBBBA tips and overtime deductions, even if enacted.
- Governor's veto: Governor Tony Evers vetoed SB 36 (tips) and AB 461 (overtime) on April 4, 2026, stating the measures did not include broader middle-class tax relief he had proposed.
Wisconsin workers will not receive state-level OBBBA deductions for 2026. The Wisconsin Department of Revenue issued a tax bulletin confirming that most OBBBA changes do not apply for state tax purposes.
What workers should do now
- Michigan workers: Claim the tips and overtime deductions on both your federal and state returns. The Treasury Taxpayer Notice confirms eligibility for 2026–2028.
- Indiana workers: Claim the deductions on both returns for 2026. Note the phase-outs ($150K/$300K MAGI) and the one-year sunset. Check IB #128 for qualifying occupations.
- Wisconsin workers: Claim only the federal deductions. Your state return will not reflect the OBBBA deductions. Do not adjust state withholding downward based on federal savings.
Federal savings are guaranteed regardless
Regardless of what Wisconsin, Michigan, or Indiana decides, the federal deductions apply in full. A single filer in any of these states can deduct up to $25,000 in qualified tips and up to $12,500 in overtime premiums on their federal return, subject to the MAGI phase-out that begins at $150,000 for single filers and $300,000for joint filers.
State conformity determines the additional layer of savings. In a state that conforms, the same deductions reduce both federal and state taxable income. In a state that does not conform, you still receive the full federal benefit. The federal savings alone can be worth thousands of dollars per year for workers with significant tip or overtime income.
Use the no tax on tips calculator to estimate your federal savings, and check the state tips and overtime tax map for the latest conformity status across all 50 states.