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Tax Year 2026Updated July 13, 2026

Does Wisconsin Tax Overtime in 2026?

Yes - Wisconsin 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. SB 859 explicitly excludes OBBBA individual deductions. Governor Evers vetoed AB 461 (the standalone overtime bill) on April 4, 2026. Overtime premium pay remains fully subject to Wisconsin's graduated income tax rates of 3.5%, 4.4%, 5.3%, and 7.65%. Wisconsin's non-conformity on overtime is definitive.

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.

Two legislative avenues have now been definitively closed. SB 859, which updated Wisconsin's IRC conformity date, explicitly excludes OBBBA individual deductions - so the conformity date update does not help overtime workers. AB 461, a standalone bill that would have created a Wisconsin state-level overtime deduction, was vetoed by Governor Evers on April 4, 2026. SB 36 (tips) was vetoed on the same date. Wisconsin's non-conformity on overtime is now settled law for 2026.

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.

Wisconsin Non-Conformity Is Now Definitive

Two potential legislative paths to Wisconsin overtime tax relief have been closed:

Workers should plan on overtime premium pay being fully taxable in Wisconsin for tax year 2026. There is no pending legislation that could change this outcome.

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. 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. SB 859 explicitly excludes OBBBA individual deductions, and Governor Evers vetoed AB 461 (the standalone overtime bill) on April 4, 2026. Wisconsin's non-conformity on overtime is now definitive.
What is SB 859 and does it help Wisconsin overtime workers?
SB 859 updated Wisconsin's IRC conformity date but explicitly excludes OBBBA individual deductions - including the overtime deduction under IRC §225. It does not provide state-level overtime tax relief. Governor Evers also vetoed AB 461, the standalone overtime deduction bill, on April 4, 2026. SB 36 (tips) was vetoed on the same date. Wisconsin's non-conformity on overtime is now settled law.
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. This requirement is unaffected by SB 859 (which excludes OBBBA deductions) or the veto of AB 461.
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.