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Tax Year 2026Updated July 13, 2026

Does Massachusetts Tax Overtime in 2026?

Yes - Massachusetts taxes overtime pay in 2026. Massachusetts DOR's final Technical Information Release, TIR 26-4 (June 23, 2026), lists the OBBBA overtime deduction (IRC §225) as not adopted. Massachusetts conforms to the IRC as of January 1, 2024, and does not follow this 2025 change. Overtime premium pay remains fully subject to the Massachusetts 5% income tax.

How Massachusetts's Overtime Tax Treatment Works

Massachusetts uses a fixed-date IRC conformity approach: the state's income tax code references the Internal Revenue Code as of January 1, 2024. The OBBBA - which created the federal overtime deduction under IRC §225 - was enacted in 2025, after the conformity cutoff. This means the federal overtime deduction does not automatically apply to Massachusetts unless the legislature updates the conformity date or specifically adopts the provision.

The Massachusetts Comptroller took the additional step of issuing explicit guidance confirming that the OBBBA "No-Tax Overtime" provision does not apply to state withholding. This means Massachusetts employers should not reduce state income tax withholding to account for the federal overtime deduction. Massachusetts DOR's final TIR 26-4 (June 23, 2026) confirms it: its chart lists "Sec. 70202. No tax on overtime" as No.

The federal overtime deduction still lowers your federal tax, but it does not carry over to Massachusetts. Overtime premium pay remains fully taxable at Massachusetts's flat 5% rate.

Federal Overtime Deduction Quick Reference

DetailValue
IRC Section§225 (OBBBA)
Maximum deduction$12,500 overtime ($25,000 MFJ)
Deduction typeAbove-the-line (Schedule 1-A)
FICA still applies?Yes (Social Security 6.2% + Medicare 1.45%)
MFS eligible?No (MFJ or Single/HoH only)
Effective datesJan 1, 2025 – Dec 31, 2028
Massachusetts treatmentDoes not conform
What qualifies?Overtime premium only (the 0.5x above regular rate), FLSA non-exempt employees

Worked Examples Comparing Federal and Massachusetts Treatment

Example 1: Nurse (single filer, $60,000 income, $8,000 overtime premium)

Federal return:
Qualifying overtime premium: $8,000
Overtime deduction claimed: $8,000 (capped at $12,500)
Estimated federal tax savings: $1,760.00

Massachusetts return:
Massachusetts does not recognize the federal overtime deduction. The full $8,000 in overtime premium pay remains subject to the Massachusetts 5% income tax. Estimated MA tax on this overtime: $400. (TIR 26-4.)

Example 2: Construction worker (single filer, $45,000 income, $5,000 overtime premium)

Federal return:
Qualifying overtime premium: $5,000
Overtime deduction claimed: $5,000 (capped at $12,500)
Estimated federal tax savings: $600.00

Massachusetts return:
Massachusetts does not recognize the federal overtime deduction. The full $5,000 in overtime premium pay remains subject to the Massachusetts 5% income tax. Estimated MA tax on this overtime: $250. (TIR 26-4.)

Massachusetts Final Guidance and Withholding

Status: non-conformity confirmed. TIR 26-4 (final, June 23, 2026) lists the OBBBA overtime deduction as not adopted, and the Massachusetts Comptroller has confirmed that OBBBA overtime deductions do not apply to state withholding. Employers withhold Massachusetts income tax on overtime with no OBBBA adjustment.

PFML and Overtime as Additional Massachusetts Costs

Massachusetts workers also pay Paid Family & Medical Leave (PFML) contributions on overtime wages. For 2026, the employee PFML rate is 0.46% on wages up to the Social Security wage base ($176,100 for 2025; 2026 base expected to increase). This means overtime workers in Massachusetts face a combined state burden of approximately 5.46% (5% income tax + 0.46% PFML) on overtime earnings - none of which is offset by the federal OBBBA deduction at the state level.

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Frequently Asked Questions

Does Massachusetts conform to the federal overtime deduction under the OBBBA?
No. Massachusetts DOR's final TIR 26-4 (June 23, 2026) lists "Sec. 70202. No tax on overtime" as not adopted, and the Massachusetts Comptroller has confirmed 'No-Tax Overtime' does not apply to state withholding. Massachusetts conforms to the IRC as of January 1, 2024; the OBBBA was enacted in 2025, outside that window.
Is the Massachusetts non-conformity on overtime final?
The Massachusetts Comptroller's guidance on overtime withholding is in effect and has practical force. However, the final Technical Information Release from the Department of Revenue has not yet been published. The expected outcome is non-conformity, but workers should monitor mass.gov/dor for the official final position.
What tax rate does Massachusetts apply to overtime pay?
Massachusetts imposes a flat 5% income tax rate on overtime pay - the same rate as regular wages. The additional 4% surtax only applies to total taxable income exceeding $1,107,750 for TY2026. There is no special overtime rate or bracket in Massachusetts.
Does the federal overtime deduction reduce my Massachusetts tax?
No. TIR 26-4 lists the overtime deduction as not adopted, so overtime pay stays in Massachusetts income and is taxed at 5%. The federal deduction still applies on your federal return.
Does Massachusetts have its own paid family and medical leave that applies to overtime?
Yes. Massachusetts Paid Family & Medical Leave (PFML) contributions apply to overtime wages. For 2026, the employee PFML rate is 0.46% on wages up to the Social Security wage base. This is in addition to the 5% income tax - overtime workers pay both.
What is the difference between the Comptroller guidance and the DOR TIR?
The Massachusetts Comptroller's announcement specifically addresses state withholding - telling employers not to reduce state withholding for OBBBA deductions. The DOR's Technical Information Release (TIR) addresses the broader income tax treatment for filing purposes. Both point to the same conclusion: OBBBA overtime deductions do not apply at the state level.