Does Texas Tax Overtime Pay? (2026)
No. Texas has no state income tax on wages, so your overtime is never state-taxed — and thanks to the new federal deduction, the premium portion can now escape federal income tax too.
The three layers of tax on Texas overtime
- Federal income tax: overtime is taxable — but for 2026, the premium ("half") portion of FLSA time-and-a-half is deductible up to $12,500 (single) / $25,000 (joint). Estimate yours with the overtime deduction calculator.
- Payroll taxes: Social Security (6.2%) and Medicare (1.45%) always apply to overtime — no exceptions.
- Texas state tax: none. Texas doesn't tax wages at all, overtime included.
What $5,000 of overtime actually costs in tax
Say you earn $5,000 of overtime (time-and-a-half) in Texas as a typical single filer:
- Payroll taxes take 7.65% ≈ $383.
- Texas state tax: $0.
- Federal income tax applies to the full $5,000 through withholding — but at filing, the ~$1,667 premium portion is deductible, worth roughly $200–$400 back depending on your bracket.
Bottom line: working overtime in Texas is about as tax-efficient as it gets in 2026.
See your full paycheck picture
The Texas paycheck calculator shows your complete 2026 take-home pay — federal, FICA — per paycheck, month, or year.
Frequently asked questions
Is overtime completely tax-free in Texas?
Not completely — Social Security and Medicare (7.65%) always apply, and federal income tax applies beyond the deductible premium portion. But with no state income tax plus the federal deduction, Texas workers keep more of their overtime than workers in almost any other state.
Is overtime withheld at a higher rate?
It can look that way on a single paycheck — a big OT check pushes that period's withholding into a higher bracket temporarily. At filing, everything settles to your actual annual rate, so the 'overtime is taxed more' feeling is a withholding illusion, not a real higher tax.
Does the federal overtime deduction lower my state taxable income?
Generally no — most states, including the no-tax states trivially and most taxing states, calculate state tax without the new federal deduction. It reduces federal taxable income only.