Overtime Tax in New York
Federal Deduction Applies — New York Has Decoupled
New York workers covered by FLSA §7 can claim the federal OBBBA overtime deduction (P.L. 119-21 §70202) on their federal tax return. However, New York has explicitly decoupled from this provision. Your overtime pay remains fully taxable under New York state income tax.
What This Means for New York Workers
If you work overtime in New York, 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.
- New York state taxes: Your full overtime pay remains taxable at NY rates up to 10.9%.
- New York City taxes: NYC residents also owe city income tax (up to 3.876%) on overtime pay.
- FICA taxes: Social Security (6.2% on first $176,100) and Medicare (1.45%) still apply to all overtime pay. Source: IRS Publication 15.
Form IT-225: Add-Back Requirement
New York requires taxpayers to add back the federal overtime deduction on their state return. This is done using Form IT-225, which includes specific addition codes for:
- Exempt overtime pay (OBBBA overtime deduction add-back)
- Exempt tip income (OBBBA tips deduction add-back)
This means the federal deduction has no effect on your New York state tax liability. Your state taxable income includes the full amount of your overtime pay.
New York State Income Tax Rates
New York has a graduated income tax with rates ranging from 4% to 10.9%. The top rate of 10.9% applies to income over $25,000,000. Common brackets for overtime workers:
| Taxable Income (Single) | Rate |
|---|---|
| $0 – $8,500 | 4% |
| $8,501 – $11,700 | 4.5% |
| $11,701 – $13,900 | 5.25% |
| $13,901 – $80,650 | 5.5% |
| $80,651 – $215,400 | 6% |
| $215,401 – $1,077,550 | 6.85% |
NYC residents face an additional city income tax of up to 3.876%, bringing the combined state+city top rate above 14%.
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 New York conform to the federal overtime tax deduction?
No. New York has explicitly decoupled from the OBBBA overtime deduction. Taxpayers must add back the deduction on their NY return via Form IT-225.
Do New York workers get any tax savings on overtime?
Yes — on their federal return. NY workers can claim the federal OBBBA overtime deduction (up to $12,500 single/$25,000 MFJ). Their NY state income tax on overtime is unchanged.
What about New York City income tax on overtime?
NYC income tax (up to 3.876%) also still applies to overtime pay. The federal deduction does not reduce NYC tax.
Will New York conform in the future?
Unknown. The NY legislature would need to pass new legislation to conform. Consult a CPA or monitor the NYS Department of Taxation and Finance for updates.