Overtime Tax Savings in Texas
↻ Updated 2026 tax yearTexas takes no income tax from your wages, so the only tax on your overtime is federal — and the federal deduction is worth its full value here with nothing clawed back at the state level. On the example below, $4,500 of overtime premium saves $580. What no state can change is the $344 of Social Security and Medicare on the same dollars.
Texas levies no state income tax on wages, so there is no state deduction to conform — and no state tax on the income for a deduction to remove.
Texas levies no state income tax on wages, so there is no state deduction to conform — and no state tax on the income for a deduction to remove.
Texas takes no income tax at all, so the only tax left on your qualified overtime premium is federal — and the $344 of Social Security and Medicare, which no OBBBA deduction touches.
Why Texas has nothing to conform to
Texas is one of nine states that levy no individual income tax on wages. Conformity is a question about how a state's income tax borrows definitions from the federal one, and Texas has no such tax to borrow into.
That makes Texas the simplest case in the country for this provision, and quietly the best one. Workers in states with an income tax typically get the federal deduction and watch their state keep taxing the same dollars; here there was never a second bill to worry about.
It also means the federal cap is the only ceiling that matters to you. The $12,500 overtime cap ($25,000 filing jointly) and its phase-out above $150,000 of MAGI are the whole story of what you can claim.
What $4,500 of overtime premium is actually worth in Texas
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.
Texas adds nothing to that and takes nothing away. The total saving is $580, and the $344 of Social Security and Medicare on the same $4,500 is untouched — as it is in every state, because these are income tax deductions and payroll tax is a separate system.
Move the sliders to your own numbers and the arithmetic follows. The two things that will not change are Texas's treatment and the payroll tax, which applies to the first dollar and the last.
What overtime tax relief does not do, in Texas 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 Texas does between now and then, the federal provision has a fixed end date.
Frequently asked questions
Is overtime taxed in Texas?
No. Texas levies no individual income tax on wages, so your overtime face no state income tax at all — before or after the federal OBBBA deduction.
Federal income tax and Social Security and Medicare still apply. On the example above, that is $580 of federal income tax removed by the deduction and $344 of payroll tax that stays.
How much will the overtime deduction save me in Texas?
$580 on the example above — $4,500 of overtime premium against $62,400 of other wages, filing single. With no Texas income tax, the federal saving is the whole saving.
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 Texas conform to the federal OBBBA deductions?
Texas levies no state income tax on wages, so there is no state deduction to conform — and no state tax on the income for a deduction to remove.
The same is true of the senior deduction and the car loan interest deduction: with no state income tax, none of the four has a Texas dimension. The conformity tracker shows how the other 50 jurisdictions treat all four.
Does the overtime deduction reduce my Social Security and Medicare tax in Texas?
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.
For a worker in Texas, payroll tax is therefore the only federal tax on overtime that the deduction leaves in place.
References for Texas
Texas levies no individual income tax on wages, so the determination rests on that single fact rather than on a conformity analysis.
- Starting point and IRC conformitysecondaryTax Foundation — State tax implications of the One Big Beautiful Bill ActStarting points and IRC conformity by state
- State tax agencyprimaryTexas Comptroller of Public AccountsWhere 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 Texas revenue department before filing.
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