Overtime Tax in California
Federal Deduction Applies — State Does Not Conform
California workers covered by FLSA §7 can claim the federal OBBBA overtime deduction (P.L. 119-21 §70202) on their federal tax return. However, California has not conformed to this provision. Your overtime pay remains fully taxable under California state income tax.
What This Means for California Workers
If you work overtime in California, here is how your taxes are affected:
- Federal taxes: You can deduct up to $12,500 (single/HoH) or $25,000 (MFJ) of your overtime premium from federal taxable income. Source: IRS Newsroom.
- California state taxes: Your full overtime pay remains taxable at California rates up to 13.3%.
- FICA taxes: Social Security (6.2% on first $176,100) and Medicare (1.45%) still apply to all overtime pay regardless. Source: IRS Publication 15.
California IRC Conformity
California uses a static conformity date to align with the Internal Revenue Code. The state periodically updates this date through legislation but does not automatically adopt federal tax changes.
| Detail | Status |
|---|---|
| IRC conformity date | January 1, 2025 (SB 711) |
| OBBBA signed | July 4, 2025 |
| State OT deduction | Not available |
| Separate conformity bill | None enacted as of April 2026 |
Check with the California Franchise Tax Board (FTB) or a California-licensed CPA for the latest conformity status.
California Daily Overtime and the Federal Deduction
California mandates overtime pay for hours worked over 8 in a single day, which is stricter than the federal FLSA standard of 40 hours per week. However, the federal OBBBA deduction only covers overtime required by FLSA §7 — the weekly 40-hour threshold.
Federal Overtime Deduction: Quick Reference
| Parameter | Single / HoH | MFJ |
|---|---|---|
| Max deduction | $12,500 | $25,000 |
| Phaseout starts | $150,000 MAGI | $300,000 MAGI |
| Deduction eliminated | $275,000 | $550,000 |
| Eligible premium | 0.5x hourly rate only (not straight-time) | |
| MFS eligible? | No | |
Sources: IRS Newsroom, IRS FAQ.
Frequently Asked Questions
Does California conform to the federal overtime tax deduction?
No. California’s IRC conformity date (January 1, 2025) predates the OBBBA (July 4, 2025). No separate conformity legislation has been enacted as of April 2026.
Do California workers get any tax savings on overtime?
Yes — on their federal return. You can claim the federal OBBBA overtime deduction (up to $12,500 single/$25,000 MFJ) on your federal taxes. Your California state income tax on overtime is unchanged.
Does California daily overtime qualify for the federal deduction?
No. The federal deduction only covers overtime required by FLSA §7 — hours worked over 40 per week. California’s state-mandated daily overtime (over 8 hours/day) does not qualify. (IRS FAQ A1)
Will California conform in the future?
Unknown. The California legislature would need to pass new conformity legislation. Consult a CPA or monitor the California FTB website for updates.