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Tax Year 2026Updated July 13, 2026

Does Wisconsin Tax Overtime in 2026?

Yes - Wisconsin currently taxes overtime pay in 2026. Wisconsin's IRC conformity date (December 31, 2022) predates the OBBBA, so the federal overtime deduction (IRC §225) does not apply for Wisconsin state purposes. Overtime premium pay remains fully subject to Wisconsin's graduated income tax rates of 3.5%, 4.4%, 5.3%, and 7.65%. Pending legislation (SB 859) would update the conformity date, but it has not been enacted as of August 2026.

How Wisconsin's Overtime Tax Treatment Works

Wisconsin uses a "fixed-date" approach to IRC conformity: the state references the Internal Revenue Code as it existed on December 31, 2022. Federal tax law changes enacted after that date - including the OBBBA overtime deduction under IRC §225 - do not automatically apply to Wisconsin state income tax.

Wisconsin starts its income tax calculation from federal AGI, but requires taxpayers to add back deductions that are not recognized under the 2022 IRC. Workers who claim the federal overtime deduction on their IRS return must add that amount back on their Wisconsin return. The overtime premium pay (the 0.5x portion above regular rate for time-and-a-half, or the 1.0x premium for double-time) remains fully taxable at Wisconsin's graduated rates.

The state Legislature has introduced SB 859 to update the conformity date and potentially adopt OBBBA provisions. If enacted, the overtime deduction would flow through to Wisconsin returns. However, the bill's passage is uncertain, and workers should plan on overtime being fully taxable in Wisconsin for tax year 2026 while monitoring legislative developments.

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
Wisconsin treatmentDoes not conform
What qualifies?Overtime premium only (the 0.5x above regular rate), FLSA non-exempt employees

Worked Examples Comparing Federal and Wisconsin Treatment

Example 1: Factory worker (single filer, $50,000 income, $6,000 overtime premium)

Federal return:
Qualifying overtime premium: $6,000
Overtime deduction claimed: $6,000 (capped at $12,500)
Estimated federal tax savings: $720.00

Wisconsin return:
Wisconsin does not recognize the federal overtime deduction. The full $6,000 in overtime premium pay remains subject to Wisconsin income tax. At this income level, overtime falls in Wisconsin's 4.4% bracket ($14,680–$50,480). Estimated WI tax on overtime: approximately $264.

Example 2: Nurse (single filer, $75,000 income, $12,500 overtime premium - federal cap reached)

Federal return:
Qualifying overtime premium: $12,500
Overtime deduction claimed: $12,500 (capped at $12,500)
Estimated federal tax savings: $2,750.00

Wisconsin return:
Wisconsin does not recognize the federal overtime deduction. The full $12,500 in overtime premium pay remains subject to Wisconsin income tax. At this income level, overtime falls in Wisconsin's 5.3% bracket ($50,480–$315,310). Estimated WI tax on overtime: approximately $662.50.

Pending Legislation SB 859

SB 859 is pending legislation in the Wisconsin Legislature that would update Wisconsin's IRC conformity date to include the OBBBA provisions. If enacted, the federal overtime deduction (up to $12,500 single / $25,000 MFJ) would automatically apply for Wisconsin state purposes, reducing Wisconsin taxable income for qualifying workers.

Current status: As of August 2026, SB 859 has not been enacted. Workers should not rely on its passage for 2026 tax planning. If it passes mid-year, retroactive application to January 1, 2026 is possible but would depend on the bill's language.

This page will be updated if SB 859 is enacted or fails definitively.

Wisconsin's Graduated Brackets and Overtime

Wisconsin's four-bracket system means the state tax cost of overtime depends on total income. For a factory worker earning $50,000, overtime premium falls in the 4.4% bracket ($14,680–$50,480 for single filers) - adding approximately $264 in state tax on $6,000 of overtime premium. For a nurse at $75,000, overtime pushes into the 5.3% bracket ($50,480–$315,310), costing approximately $662.50 in state tax on $12,500 of overtime premium. Wisconsin's income-based standard deduction ($12,760 max for single filers) phases out at higher incomes, increasing the effective burden on overtime earners.

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Frequently Asked Questions

Does Wisconsin conform to the federal overtime deduction under the OBBBA?
No - not currently. Wisconsin's IRC conformity date is fixed at December 31, 2022, which predates the OBBBA (enacted 2025). The federal overtime deduction (IRC §225) does not apply for Wisconsin state purposes unless the legislature updates the conformity date. Pending SB 859 would address this.
What is SB 859 and could it give Wisconsin workers overtime tax relief?
SB 859 is pending legislation that would update Wisconsin's IRC conformity date to include OBBBA provisions. If enacted, the federal overtime deduction (up to $12,500 single / $25,000 MFJ) would apply for Wisconsin state purposes. As of August 2026, the bill has not passed. Workers should plan on overtime being fully taxable in Wisconsin for 2026.
What Wisconsin tax rates apply to overtime pay?
Wisconsin uses four graduated brackets for TY2026: 3.5% on the first $14,680, 4.4% on $14,680–$50,480, 5.3% on $50,480–$315,310, and 7.65% above $315,310 (single filers). Most hourly workers' overtime premium falls in the 4.4% or 5.3% brackets.
Do I need to add back the federal overtime deduction on my Wisconsin return?
Yes. If you claim the federal overtime deduction and it reduces your federal AGI, you must add that amount back when computing Wisconsin taxable income. Wisconsin starts from federal AGI but applies modifications for deductions not recognized under the December 31, 2022 IRC conformity date.
Does Wisconsin's supplemental withholding rate apply to overtime?
Wisconsin's supplemental withholding rate is 7.65% (the top marginal bracket rate). Employers may use this rate when withholding state income tax on supplemental wages, including overtime. The actual tax rate owed depends on the worker's total taxable income and bracket placement.
Only the overtime premium is deductible federally - what does that mean?
Under the federal OBBBA, only the 'premium' portion of overtime pay qualifies for the deduction - not the total overtime wages. For time-and-a-half, only the 0.5x above the regular rate is deductible. For example, if your regular rate is $20/hour and you earn $30/hour for overtime, only the $10/hour premium qualifies. This distinction matters for federal tax but is moot in Wisconsin since the state does not recognize the deduction at all.