Overtime Tax in New York
Federal Deduction Applies — But Not to New York State Tax
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, the deduction does not reach your New York return: New York’s calculation starts from federal AGI, and the overtime deduction is taken after AGI, so your overtime pay remains fully taxable under New York state income tax. Use the overtime tax calculator to estimate your federal savings, check eligibility, or read the complete overtime guide. Compare with Texas and Florida, which have no 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.
Why There Is No Add-Back — and What Changed for Tips
New York state taxable income is built from federal adjusted gross income (federal AGI). The OBBBA overtime and tips deductions are below-the-line deductions — taken after AGI on the federal return — so they never enter the New York calculation in the first place. No Form IT-225 addition is needed, and the 2025 IT-225 instructions contain no overtime or tips addback codes.
The practical result for overtime is the same: the federal deduction has no effect on your New York state tax liability, and your state taxable income includes the full amount of your overtime pay.
Tips changed in 2026: the FY2027 state budget (Chapter 59 of 2026) created New York’s own exclusion of up to $25,000 in qualified tips from New York AGI, starting with tax year 2026. Overtime received no equivalent state exemption.
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’s income tax starts from federal AGI, so the OBBBA overtime deduction never flows through to the state return — no addback is needed, and there is no New York overtime benefit. New York did enact its own tips break: up to $25,000 of qualified tips are excluded from NY AGI starting with tax year 2026.
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?
For overtime, the legislature would need to pass its own exemption — bills like S3914-A have been introduced but not enacted as of August 2026. For tips, New York already acted: the FY2027 budget exempts up to $25,000 in qualified tips from tax year 2026. Consult a CPA or monitor the NYS Department of Taxation and Finance for updates.