Starting with the 2026 tax year, there is no state income tax on tips in Oklahoma. Governor Stitt signed House Bill 2153 on May 11, 2026, letting tipped workers exclude reported gratuities from their Oklahoma taxable income. A separate federal provision layered on top allows eligible workers to deduct up to $25,000 in tip income on their federal return. Payroll taxes still apply to every dollar.
How the Oklahoma Exclusion Works
HB 2153 adds a new adjustment to the Oklahoma Income Tax Act. Reported tip income comes out of your state taxable income as a subtraction from your federal adjusted gross income when you calculate what you owe Oklahoma. Earn $35,000 in base wages and $12,000 in tips, and Oklahoma taxes only the $35,000.
Based on the legislative text, the Oklahoma exclusion does not appear to have an income cap or a dollar ceiling on how much tip income you can exclude. Only tip income formally documented through IRS reporting qualifies, so tips that show up on your W-2 or through other official channels are what count.
Oklahoma’s top marginal income tax rate drops to 4.5% for tax year 2026, down from 4.75%.1Oklahoma State Senate. Oklahoma Legislature Sends Comprehensive Tax Cuts and Modernization Plan to Governor For a tipped worker earning $15,000 a year in gratuities, the state tax savings from the exclusion works out to roughly $500 to $675 annually, depending on the bracket those earnings would have fallen into.
The Federal Deduction Stacked on Top
The federal “No Tax on Tips” provision, enacted as part of the One Big Beautiful Bill Act, applies to 2025 returns filed in 2026. Eligible employees and self-employed workers can deduct up to $25,000 in qualified tip income per return, whether they itemize or take the standard deduction.2U.S. Department of the Treasury. Treasury and IRS Issue Proposed Regulations Around No Tax on Tips
Unlike the Oklahoma exclusion, the federal deduction phases out at higher incomes. It begins to disappear once your income exceeds $150,000 for single filers or $300,000 for joint filers.2U.S. Department of the Treasury. Treasury and IRS Issue Proposed Regulations Around No Tax on Tips Most tipped workers earn well below those thresholds, so the phase-out won’t hit the typical server or bartender.
The practical result: for a tipped worker in Oklahoma, gratuities can escape both state income tax and federal income tax (up to $25,000) starting with tax year 2026. That’s a real change from a year earlier, when every dollar was fully taxable at both levels.
What Still Gets Taxed
Neither law touches Social Security tax (6.2%) or Medicare tax (1.45%) on tip income. Your employer still withholds FICA on reported tips exactly as on regular wages, and those deductions still appear on your pay stub.
Reporting rules also stay in place. If you receive cash tips of $20 or more in a calendar month, you’re required to report the total to your employer by the tenth of the following month.3Internal Revenue Service. Topic No. 761, Tips – Withholding and Reporting Skipping that step doesn’t just cause a payroll tax problem. It can also put the state and federal tax breaks out of reach, because both depend on tips being formally documented through IRS channels. Tips under $20 in a month don’t need to be reported to your employer, but they’re still taxable when you file.
Who Counts as a Tipped Worker
Under federal labor law, a tipped employee is someone who customarily and regularly receives more than $30 a month in tips.4U.S. Department of Labor. Fact Sheet 15 – Tipped Employees Under the Fair Labor Standards Act That definition covers restaurant servers, bartenders, valets, hair stylists, nail technicians, hotel housekeepers, and delivery drivers who receive gratuities. Full-time, part-time, and seasonal workers all qualify as long as they meet the threshold. The break turns on the nature of your earnings, not on your hours.
Which Tips Qualify
The exclusion covers voluntary gratuities left at the customer’s discretion. Cash tips handed to you directly, amounts added to a credit card slip, and tips sent through a payment app all count, provided you actually receive the money and the customer chose the amount freely.5Cornell Law Institute. Oklahoma Administrative Code 710:65-19-111 – Food; Tips and Service Charges
Mandatory service charges do not qualify. When a restaurant adds an automatic 18% or 20% gratuity for large parties, that amount is treated as regular wages, because the customer didn’t choose it. If your employer collects those charges and redistributes them, the money lands in your paycheck as ordinary income and stays fully taxable at both levels.5Cornell Law Institute. Oklahoma Administrative Code 710:65-19-111 – Food; Tips and Service Charges
If your employer takes a slice of your voluntary tips for administrative fees or credit card processing costs, only the amount that actually reaches you counts toward the exclusion. The employer’s cut is not your income to exclude.
Tip Pooling
Many Oklahoma restaurants require tip pooling, with servers sharing a percentage of tips with bussers, bartenders, or food runners. Federal law allows these arrangements but draws firm lines. Employers, managers, and supervisors cannot take a cut from the pool, regardless of whether the employer claims a tip credit.4U.S. Department of Labor. Fact Sheet 15 – Tipped Employees Under the Fair Labor Standards Act
When an employer takes the tip credit and pays less than $7.25 in cash wages, only employees who customarily receive tips can join the pool. When the employer pays the full minimum wage without a tip credit, the pool can include traditionally non-tipped workers like cooks and dishwashers.4U.S. Department of Labor. Fact Sheet 15 – Tipped Employees Under the Fair Labor Standards Act Either way, tips received through a valid pool are still voluntary gratuities. The amount you actually take home from the pool is what you report and exclude on your Oklahoma return.
Records That Protect You
Keeping a daily tip log is the single most useful thing you can do to protect yourself in an audit. Write down the date, your shift, and how much you received in cash and credit card tips. It takes about 30 seconds at the end of a shift and can save you serious trouble if the Oklahoma Tax Commission or IRS questions your return.
Your year-end W-2 should reflect the tip income you reported through the year. If your daily records don’t match, resolve the difference before you file. The state exclusion is a subtraction from your federal adjusted gross income on your Oklahoma return, so the reported tip figure has to be accurate in both places.
Restaurants and bars with more than 10 employees on a typical business day file IRS Form 8027 annually, reporting total tip income and allocated tips for the establishment.6Internal Revenue Service. Instructions for Form 8027 If your reported tips look low relative to sales, the IRS can allocate additional tip income to you. A daily log is your evidence to push back on an allocation that overstates what you actually earned.
Filing Your Oklahoma Return in 2026
Oklahoma’s online filing portal, OkTAP (Taxpayer Access Point), accepts state returns around the clock and generally processes them faster than paper submissions.7Oklahoma Tax Commission. Oklahoma Tax Commission If you’d rather mail a paper return, use the address listed in the Form 511 instructions.
The tip exclusion shows up as an adjustment on your Oklahoma Form 511, dropping your state taxable income below your federal adjusted gross income. The amount you subtract has to match what’s on your W-2 and your personal records. Attach every required schedule before you submit. After filing, you can check refund status through the state’s online tracker.
One timing note for the 2026 filing season: because HB 2153 was signed in May 2026, the Oklahoma Tax Commission may need time to update Form 511’s instructions and schedules to reflect the new exclusion. Watch the Tax Commission’s website for updated guidance as the filing deadline approaches.