State Taxes

Wisconsin Governor Vetoes No-Tax-on-Tips and Overtime Bills

By GetTaxCalculator Editorial Team· Published 2026-09-11

On April 4, 2026, Wisconsin Governor Tony Evers vetoed two bills that would have eliminated state income taxes on tips and overtime pay. Senate Bill 36 would have exempted up to $25,000 of qualified tips, and Assembly Bill 461 would have created a subtraction for overtime compensation. Both had passed their respective chambers. The vetoes, combined with Wisconsin's existing IRC conformity gap and the exclusions in SB 859, mean Wisconsin workers will pay state tax on all tip and overtime income for 2026.

What Governor Evers vetoed

Senate Bill 36 (tips): Would have created a Wisconsin income tax subtraction for qualified tip income up to $25,000 per year. The bill passed the Assembly in January 2026 before reaching the governor's desk.

Assembly Bill 461 (overtime): Would have created a subtraction for qualified overtime compensation with limits of $12,500 for single filers and $25,000 for joint filers. The bill also passed both chambers.

Governor Evers rejected both measures, stating they did not include "more sweeping tax relief targeted at middle-class earners" that he had proposed. He framed the vetoes as a rejection of piecemeal tax cuts driven by the federal OBBBA rather than a comprehensive state tax reform.

Three independent barriers to conformity

Even without the vetoes, Wisconsin workers would face two additional barriers:

IRC conformity date: Wisconsin's tax code references the federal IRC as of December 31, 2022. The OBBBA was enacted in July 2025. Any OBBBA provision - including the tips, overtime, and senior deductions - falls outside Wisconsin's conformity window. The Wisconsin Department of Revenue has issued a tax bulletin confirming that most OBBBA changes do not apply for state tax purposes.
SB 859 exclusion: Senate Bill 859, the periodic IRC update bill, explicitly excludes the OBBBA tips and overtime deductions from its scope. Even if SB 859 is enacted, it would not bring these deductions into Wisconsin law. The exclusion was deliberate - the fiscal estimate noted the provisions were carved out.
Governor's veto: The standalone bills (SB 36 and AB 461) were the only legislative vehicle for these deductions, and the governor rejected them.

The combination of these three barriers makes Wisconsin one of the most definitively non-conforming states in the country. No administrative reinterpretation or executive action can change the outcome - only new legislation signed by the governor would bring OBBBA deductions to Wisconsin state returns.

What this costs Wisconsin workers

Wisconsin's graduated income tax rates for 2026 range from 4% to 8%. A tipped worker who earns $20,000 in qualified tips pays between $700 (at the lowest bracket) and $1,530 (at the top bracket) in Wisconsin state tax on that income - tax that would have been eliminated if the vetoed bills had been signed.

For comparison, workers in neighboring Michigan will pay zero state tax on the same tips income thanks to H.B. 4961 (signed October 2025). Iowa workers also pay zero state tax on tips through structural flow-through. The contrast is stark for Wisconsin workers in border communities.

What WI workers should do

Claim the federal deduction. The federal tips deduction (up to $25,000) and overtime deduction (up to $12,500) apply on your federal return regardless of the governor's veto. File Schedule 1-A.
Do not adjust state withholding. Your Wisconsin state tax is calculated without the OBBBA deductions. Do not reduce your state withholding based on federal savings - you will owe the full state tax on all tips and overtime income.
Plan for the state-federal gap. Your federal taxable income will be lower than your Wisconsin taxable income for the same earnings. This may result in a different refund or balance-due outcome than you expect.
Monitor the legislature. New bills could be introduced in future sessions. However, the governor's stated preference for comprehensive reform makes standalone tips/overtime bills unlikely to be signed without broader changes.

For the complete state-by-state breakdown, see our state tips and overtime taxes map.

Frequently Asked Questions

Does Wisconsin tax tips in 2026?

Yes. Wisconsin's IRC conformity date is December 31, 2022. The OBBBA tips deduction does not apply on Wisconsin state returns. Governor Evers vetoed SB 36 (tips) on April 4, 2026. Tips are taxed at WI graduated rates from 4% to 8%.

Does Wisconsin tax overtime in 2026?

Yes. Governor Evers vetoed AB 461 (overtime) on April 4, 2026. The OBBBA overtime deduction does not apply for Wisconsin state tax purposes.

Why did the governor veto the tips and overtime bills?

Governor Evers stated the bills did not include broader middle-class tax relief he had proposed. He rejected stand-alone tips and overtime exemptions in favor of a more comprehensive approach.

Could Wisconsin conform in the future?

Yes, the legislature could pass new bills. However, the current IRC conformity date (12/31/2022) and the governor's stated position make near-term conformity unlikely without a change in political dynamics.

Can I still claim the federal OBBBA deductions?

Yes. The federal tips deduction (up to $25,000) and overtime deduction (up to $12,500) apply on your federal return regardless of Wisconsin's position.