Does Utah Tax Overtime in 2026?
Yes - Utah still taxes overtime premium. The Utah State Tax Commission has said the new federal deductions "will have no effect on the Utah return as they are a 'below the line' deduction." Utah starts from federal AGI and has no subtraction for overtime premium, so it is taxed at 4.45%.
How Utah's Overtime Tax Treatment Works
Where Utah starts: TC-40 line 4 is "Federal adjusted gross income from federal return."
Where the federal deduction sits: the overtime premium deduction is figured on Schedule 1-A after AGI and subtracted on Form 1040 line 13b. It never changes federal AGI, so it never changes Utah income.
The Tax Commission's position: its January 15, 2026 webinar says these deductions "will have no effect on the Utah return," and Utah's list of subtractions (TC-40A) has none for overtime premium.
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 |
| Utah treatment | Does not conform |
| What qualifies? | Overtime premium only (the 0.5x above regular rate), FLSA non-exempt employees |
Worked Examples Comparing Federal and Utah Treatment
Example 1: Warehouse worker with $8,000 in overtime premium (single filer, 12% federal bracket)
Qualifying overtime premium: $8,000
Overtime deduction claimed: $8,000 (capped at $12,500)
Estimated federal tax savings: $960.00
Utah return:
Utah starts from federal AGI, which the deduction does not change, so the full $8,000 stays in Utah income. At Utah's 4.45% rate that is about $356 of Utah tax. No Utah savings.
Example 2: Nurse at the single-filer cap, $12,500 deducted (single filer, 22% federal bracket)
Qualifying overtime premium: $12,500
Overtime deduction claimed: $12,500 (capped at $12,500)
Estimated federal tax savings: $2,750.00
Utah return:
The federal deduction saves federal tax only. On the Utah return the $12,500 is still income, about $556 of Utah tax at 4.45%.
Utah Notes
Flat 4.45% rate: overtime premium is taxed at the same flat rate as other income.
What would change it: only a Utah law adding a subtraction for overtime premium. None exists for 2026.
Related Tools
- No Tax on Overtime Calculator - calculate your federal overtime deduction
- Utah Tax Guide - full state tax overview
- Utah Paycheck Calculator
- Does Utah Tax Tips?
- W-2 Code TP: Tips Reporting Guide
- W-2 Code TT: Overtime Reporting Guide
- All 51 States: Tips & Overtime Tax Map