Texas state tax context
Texas has no state income tax on wages, so this federal deduction is the whole story for Texas residents — there's no state overtime tax treatment to layer on top.
How "no tax on overtime" actually works
For tax years 2025 through 2028 the One Big Beautiful Bill Act lets you deduct the overtime premium — the extra half of time-and-a-half — from your federal taxable income.
Key limits
- Deduction cap: $12,500 (single) / $25,000 (married filing jointly) per year.
- Phase-out starts at $150,000 MAGI (single) / $300,000 (joint).
- Only FLSA-required overtime premiums qualify (W-2, non-exempt employees).
Frequently asked questions
Does this deduction change my Texas state tax bill?
Texas has no state income tax on wages, so this federal deduction is the whole story for Texas residents — there's no state overtime tax treatment to layer on top.
Do I need to itemize to claim this?
No. It is a federal above-the-line deduction, so you can claim it alongside the standard deduction regardless of Texas's rules.
How long is this deduction available?
Tax years 2025 through 2028. It expires after 2028 unless Congress extends it.
Where do I claim it when filing?
On your federal Form 1040 as an above-the-line deduction — tax software and the IRS instructions walk through the new OBBBA lines for 2025 returns onward.