Overtime Tax Savings in Delaware
↻ Updated 2026 tax yearThe federal deduction for qualified overtime does not reach your Delaware return. Delaware charges a graduated schedule from 0% to 6.6%, and it still taxes this money in full — about $288 on the $4,500 in the example below. You keep the $580 federal saving and nothing more.
Delaware starts its calculation from federal adjusted gross income. These four deductions reduce federal taxable income and never touch AGI, so they are invisible to a Delaware return — the state still taxes the income in full.
Delaware starts its calculation from federal adjusted gross income. These four deductions reduce federal taxable income and never touch AGI, so they are invisible to a Delaware return — the state still taxes the income in full.
Delaware still charges $288 of income tax on this money, and $344 of Social Security and Medicare applies on top. The federal deduction is the only part that moves.
Why Delaware still taxes your overtime
The four OBBBA deductions are below the line. They reduce federal taxable income — Schedule 1-A totals onto Form 1040 line 13b — and they never reduce federal adjusted gross income. Delaware begins its own calculation from federal agi, which the deduction never touched.
So nothing was decoupled and no vote was held. Delaware simply carried on taxing overtime the way it always had, because from the state's point of view nothing about your income changed. This is the position most American workers are in, and it is the part of "no tax on overtime" that the name obscures.
Delaware charges a graduated schedule from 0% to 6.6%. On the $4,500 in the example above, the state still takes about $288 — an effective 6.4% on that income, on top of the Social Security and Medicare that no state or federal provision removes.
What $4,500 of overtime premium is actually worth in Delaware
Take a single filer with $62,400 of other wages and $4,500 of qualified overtime premium — the defaults loaded in the calculator above. Federal taxable income falls by the full $4,500, worth $580 at this filer's bracket.
Delaware taxable income does not move at all, so the state still collects about $288 on that money. Add $344 of Social Security and Medicare, which no OBBBA provision reduces, and the total tax on your $4,500 falls from about $1,212 to about $632.
Move the sliders to your own numbers and the arithmetic follows. The two things that will not change are Delaware's treatment — the state taxes this money regardless of what your federal return says and the payroll tax, which applies to the first dollar and the last.
What overtime tax relief does not do, in Delaware or anywhere
Your overtime is still wages. It stays in boxes 1, 3 and 5 of your W-2 — the box 12 code TT is informational — so Social Security and Medicare are computed on exactly the same amount as before.
Only the premium half qualifies — the amount paid in excess of your regular rate, which is one third of a time-and-a-half payment. $13,500 of overtime pay produces a $4,500 deduction, not $13,500. The cap is $12,500 ($25,000 filing jointly) and it phases out above $150,000 of MAGI.
And all four OBBBA deductions expire after tax year 2028. Whatever Delaware does between now and then, the federal provision has a fixed end date.
Frequently asked questions
Is overtime taxed in Delaware?
Yes — in full. The federal deduction does not reach your Delaware return, because Delaware starts from federal agi and these deductions only reduce federal taxable income.
Delaware charges a graduated schedule from 0% to 6.6%. On $4,500 of overtime, that is about $288 of state tax that the federal provision leaves entirely alone.
How much will the overtime deduction save me in Delaware?
$580 on the example above — federal only. Delaware keeps taxing the $4,500, so the state bill of about $288 is unchanged by the deduction.
A deduction is worth your marginal rate, not its face value, which is why $4,500 of income produces $580 rather than $4,500 of relief. Enter your own figures above for a number specific to you.
Does Delaware conform to the federal OBBBA deductions?
Delaware starts its calculation from federal adjusted gross income. These four deductions reduce federal taxable income and never touch AGI, so they are invisible to a Delaware return — the state still taxes the income in full.
That determination covers the overtime deduction; the senior and car loan interest deductions are tracked separately, though they usually follow the same rule because the mechanism is identical. Our conformity tracker shows all four deductions across all 50 states and DC.
Does the overtime deduction reduce my Social Security and Medicare tax in Delaware?
No, and not in any state. Qualified overtime remain in boxes 3 and 5 of your W-2, so the 6.2% Social Security and 1.45% Medicare are computed on the same wages as before. On the example above that is $344 which no OBBBA provision touches.
Combined with Delaware's income tax, which it does not, that is why the practical relief is smaller than "no tax on overtime" implies.
References for Delaware
Delaware starts its income tax calculation from federal agi with rolling conformity to the Internal Revenue Code. That is what every status on this page is derived from.
- Starting point and IRC conformitysecondaryTax Foundation — State tax implications of the One Big Beautiful Bill ActStarting points and IRC conformity by state
- State tax agencyprimaryDelaware Division of RevenueWhere to confirm current treatment — not a source for the determination above
- ·IRS — Questions and answers on the deduction for qualified overtime — Confirms only the FLSA premium above the regular rate qualifies
- ·IRS Schedule 1-A (Form 1040) — Additional Deductions — Tips Part II, overtime Part III, car loan interest Part IV, seniors Part V
- ·Tax Foundation — State tax implications of the One Big Beautiful Bill Act — Starting points and IRC conformity by state
- ·Tax Foundation — 2026 State Income Tax Rates and Brackets — State wage-tax estimate; excludes local income taxes
- ·IRS Rev. Proc. 2025-32 — 2026 inflation adjustments — Tax year 2026 brackets & standard deduction
Conformity status last reviewed July 22, 2026. State law can change — check with the Delaware revenue department before filing.
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