States with no tax on wages
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming don't tax wages. If you live and work in one of them, your overtime is already free of state income tax, and the federal deduction is the whole story.
Why most other states still tax overtime
The federal deduction is taken after adjusted gross income. Most states start their own income tax from federal AGI, so the deduction doesn't carry over unless the state passes its own version. A few states have moved to adopt it and others have explicitly declined; the list is changing, so check your state's revenue department before you file.
Texas
No state income tax. Texas also has no state overtime law beyond the federal rule, so the overtime on your pay stub is FLSA overtime, and the premium is deductible on your federal return.
Florida
No state income tax, and overtime follows the federal 40-hour rule. A Florida worker's whole benefit is the federal deduction, up to $12,500 ($25,000 joint).
New York
New York's income tax starts from federal AGI and the state hasn't adopted the overtime deduction, so overtime remains taxable for New York State and, for city residents, New York City income tax. Bills to exempt overtime have been introduced in Albany; check the Department of Taxation and Finance guidance for the year you're filing. The federal deduction applies in full either way.
Pennsylvania
Pennsylvania taxes compensation at a flat 3.07% under its own rules, separate from federal taxable income, so overtime stays taxable for the state. Local earned income taxes apply as before. Federal deduction: yes.
California
California still taxes overtime, and its daily overtime after 8 hours only counts federally when the week also goes over 40 hours. See the California page for examples.
How to check your state
- Look for your state's 2026 conformity or "decoupling" guidance on the revenue department website.
- Your state return's instructions will list any subtraction for qualified overtime if the state allows one.
- Tax software applies the state rule automatically once it's updated for the season.
Updated November 3, 2026. Sources: Internal Revenue Code §225, IRS Notice 2025-69, state revenue department guidance.