Does California tax overtime after the federal deduction?

Yes. California has not conformed, so overtime is fully taxable on the state return even where part of it is deductible federally.

AB 1550 would conform California to both the tips and overtime deductions for 2026 through 2028. It had not been enacted when this page was written.

Does California daily overtime count for the federal deduction?

Only the part the FLSA required. California requires overtime after 8 hours in a day; the federal deduction follows the FLSA weekly rule, so the state-only portion does not qualify.

Do other states conform?

Most do not, because they start from federal AGI, which this deduction does not reduce. We have verified California directly and do not publish unverified figures for other states.

No tax on overtime in California

The deduction is federal. California has not adopted it, so your state return is unaffected.

Why California picks up nothing automatically

The federal deduction is allowed under section 63(b), which reduces federal taxable income after adjusted gross income is already fixed. A state that builds its return from federal AGI therefore never sees it.

The Franchise Tax Board has put the position plainly in its analysis of pending legislation: there is no comparable deduction for qualified tips or overtime compensation in state law. So overtime that is partly deductible federally remains fully taxable for California purposes.

The bill that would change it

Assembly Bill 1550 would conform California personal income tax law to the federal tips and overtime deductions for tax years 2026 through 2028, including for people who do not itemize. The FTB estimated the cost at $2.6 billion in 2026-27, $1.5 billion in 2027-28 and $650 million in 2028-29. A related measure, Senate Bill 984, sits in Senate committee.

Neither had been enacted when this page was written, so California remains non-conforming. Given the revenue figures, this is worth rechecking before you file.

California overtime rules are more generous than the federal ones, which does not help here. The state requires time and a half after 8 hours in a day and double time past 12. Only the portion the FLSA itself required counts as qualified overtime, so California's extra premium pay is outside the federal deduction as well as outside any state one.

What this means in practice

Work out two figures. Federal taxable income reflects the deduction, up to $12,500 or $25,000 jointly. California taxable income does not, so your state tax is calculated on the full overtime.

The same split applies in most states, for the same structural reason. We have verified California directly; we are not publishing a state-by-state conformity table, because no authoritative roundup exists and the secondary sources that offer one disagree with each other.

Common questions

Does California tax overtime after the federal deduction?: Yes. California has not conformed, so overtime is fully taxable on the state return even where part of it is deductible federally.
Could that change?: AB 1550 would conform California to both the tips and overtime deductions for 2026 through 2028. It had not been enacted when this page was written.
Does California daily overtime count for the federal deduction?: Only the part the FLSA required. California requires overtime after 8 hours in a day; the federal deduction follows the FLSA weekly rule, so the state-only portion does not qualify.
Do other states conform?: Most do not, because they start from federal AGI, which this deduction does not reduce. We have verified California directly and do not publish unverified figures for other states.