Overtime Tax in Texas
No State Income Tax — Full Federal Savings
Texas has no state income tax. There is no state tax on any wages, including overtime. Texas workers who qualify for the federal OBBBA overtime deduction (P.L. 119-21 §70202) receive the full benefit with no state tax offsetting their savings.
How the Overtime Deduction Works in Texas
As a Texas worker covered by FLSA §7, your overtime tax situation is straightforward:
- Federal income tax: Deduct up to $12,500 (single/HoH) or $25,000 (MFJ) of your overtime premium from federal taxable income. Source: IRS Newsroom.
- State income tax: $0 — Texas has no state income tax.
- FICA taxes: Social Security (6.2% on first $176,100) and Medicare (1.45%) still apply to all overtime pay. Source: IRS Publication 15.
Example: Texas Worker
A single Texas worker earning $25/hr with 10 overtime hours/week for 50 weeks and $80,000 MAGI:
| Item | Amount |
|---|---|
| Overtime premium (0.5x) | $6,250 |
| Federal deduction | $6,250 |
| Marginal rate (22%) | 22% |
| Federal tax savings | $1,375.00 |
| State tax on overtime | $0 |
| FICA still owed | $1,434.38 |
This worker saves $1,375.00 in federal income tax per year with no state tax to worry about.
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 Texas tax overtime pay?
No. Texas has no state income tax on any wages, including overtime. Your overtime is only subject to federal income tax and FICA.
Can Texas workers claim the federal overtime deduction?
Yes. Texas workers in FLSA §7 covered positions can claim the full federal OBBBA overtime deduction — up to $12,500 (single/HoH) or $25,000 (MFJ) per year. Source: IRS Newsroom.
Do Texas workers still owe FICA on overtime?
Yes. The overtime deduction reduces federal income tax only. FICA taxes (Social Security 6.2% and Medicare 1.45%) still apply to all overtime pay. Source: IRS Publication 15.
Who qualifies for the overtime deduction in Texas?
Any W-2 employee in a FLSA §7 covered position with a valid SSN filing as single, HoH, or MFJ. Salaried exempt workers and independent contractors are not eligible. (IRS FAQ A1)