Does Missouri Tax Overtime in 2026?
As of August 2026, Missouri has not issued official guidance on whether it recognizes the federal OBBBA overtime deduction (IRC §225). Missouri generally conforms to the federal tax code, which suggests the deduction may apply – but the Missouri Department of Revenue has not confirmed this. Missouri's graduated income tax tops out at 4.7%, and workers in Kansas City and St. Louis also face a separate 1% local earnings tax that the federal deduction would not reduce.
How Missouri's Overtime Tax Treatment Works
Missouri generally conforms to the Internal Revenue Code for its income tax starting point. This general conformity means that federal above-the-line deductions – including those that reduce federal AGI – typically flow through to Missouri's income tax calculation.
However, Missouri's conformity is not automatic for every provision. The state has its own graduated rate structure (top rate 4.7% for 2026) and has the authority to decouple from specific federal changes. Missouri recently made a major decision to fully exempt individual capital gains from state income tax (HB 594, effective 2025), demonstrating active management of its conformity choices.
The OBBBA overtime deduction (IRC §225) is an above-the-line deduction that reduces federal AGI. Whether Missouri recognizes this deduction depends on how Missouri's conformity statute interacts with the new IRC section and whether the Missouri DOR or legislature takes action. As of August 2026, neither confirmation nor decoupling has been announced.
Federal Overtime Deduction Quick Reference
| Detail | Value |
|---|---|
| IRC Section | §225 (OBBBA) |
| Maximum deduction | $12,500 overtime ($25,000 MFJ) |
| Deduction type | Above-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 dates | Jan 1, 2025 – Dec 31, 2028 |
| Missouri treatment | Does not conform |
| What qualifies? | Overtime premium only (the 0.5x above regular rate), FLSA non-exempt employees |
Worked Examples Comparing Federal and Missouri Treatment
Example 1: Auto assembly worker (single filer, $46,000 income, $7,000 overtime premium)
Qualifying overtime premium: $7,000
Overtime deduction claimed: $7,000 (capped at $12,500)
Estimated federal tax savings: $840.00
Missouri return:
Missouri's treatment of the federal overtime deduction is unknown. If Missouri recognizes the deduction, state savings would be approximately $329 ($7,000 at the 4.7% top marginal rate). If Missouri decouples, overtime remains fully taxable. No Missouri DOR guidance has been issued as of August 2026.
Example 2: Kansas City construction foreman (single filer, $74,000 income, $12,500 overtime premium - federal cap reached)
Qualifying overtime premium: $12,500
Overtime deduction claimed: $12,500 (capped at $12,500)
Estimated federal tax savings: $2,750.00
Missouri return:
Missouri's treatment is unconfirmed. If the deduction applies, state savings would be approximately $588 ($12,500 × 4.7%). If Missouri decouples, the full $12,500 in overtime premium pay remains taxable at up to 4.7%. Workers in Kansas City or St. Louis also owe the 1% local earnings tax on overtime regardless. The federal savings of $2,750 apply regardless.
Missouri's Manufacturing and Industrial Workforce
Missouri has a significant manufacturing base where overtime is a regular feature. Automotive assembly plants in Kansas City (GM Fairfax) and Wentzville (GM), aerospace operations in St. Louis (Boeing/Spirit AeroSystems), and food processing facilities across the state employ large numbers of hourly workers with regular overtime schedules. Construction, healthcare, and logistics also generate substantial overtime hours.
Local earnings taxes: Workers in Kansas City and St. Louis face an additional 1% earnings tax on all earned income including overtime. This local tax is separate from the state system and would not be reduced by the OBBBA overtime deduction even if Missouri conforms at the state level. A KC or STL worker's combined state-plus-local rate on overtime is 5.7% (4.7% + 1%).
Missouri's Declining Rate and Policy Context
Missouri has been gradually reducing its top income tax rate (4.95% in 2024, 4.8% in 2025, 4.7% in 2026). The state also fully exempted individual capital gains effective 2025 (HB 594). These active policy choices mean conformity with any OBBBA provision cannot be assumed – Missouri is making deliberate decisions about its tax base.
What to watch for: Missouri taxpayers should monitor the Missouri DOR website for Form MO-1040 instructions for tax year 2026 and any departmental bulletins. The Missouri General Assembly could clarify conformity during its sessions. Until official guidance is published, taxpayers should consult a Missouri tax professional.
Related Tools
- No Tax on Overtime Calculator - calculate your federal overtime deduction
- Missouri Tax Guide - full state tax overview
- Missouri Paycheck Calculator
- Does Missouri Tax Tips?
- W-2 Code TP: Tips Reporting Guide
- W-2 Code TT: Overtime Reporting Guide
- All 51 States: Tips & Overtime Tax Map