Missouri taxes your overtime pay at the same rates as your regular wages, and the new federal overtime deduction does not change that. Missouri starts its income tax calculation with your federal adjusted gross income, and the federal deduction created by the One Big Beautiful Bill Act sits below that line. So every dollar of overtime you earn in Missouri stays in the state’s tax base, even when a portion of it comes off your federal return.
Why the Federal Overtime Deduction Doesn’t Lower Your Missouri Tax
The federal deduction, enacted under Public Law 119-21 and codified at Section 225 of the Internal Revenue Code, lets eligible workers subtract qualified overtime compensation from federal taxable income for tax years 2025 through 2028.1Internal Revenue Service. One, Big, Beautiful Bill Act: Tax Deductions for Working Americans and Seniors It’s a below-the-line deduction, meaning it reduces federal taxable income but leaves federal adjusted gross income untouched.
That distinction is everything for Missouri filers. Missouri calculates state income tax starting from federal AGI, then applies the state-specific modifications in Section 143.121 of the Revised Statutes of Missouri.2Missouri Revisor of Statutes. Missouri Code 143.121 – Missouri Adjusted Gross Income Since the federal overtime deduction never touches AGI, it never enters the Missouri calculation.3MU Extension. New Tax Break on Overtime Pay Comes With Limits The federal return gets smaller; the Missouri return doesn’t.
How Missouri Taxes Overtime
Overtime wages are treated as ordinary wage income on your Missouri return. Missouri’s top individual income tax rate for 2026 is 4.70%, with lower brackets starting at 2.00%. On $5,000 of overtime earnings, the state tax runs roughly $200 or more, regardless of what you deducted federally.
Local earnings taxes are a separate layer. St. Louis and Kansas City both impose earnings taxes on total wages, and those are calculated independently of any federal deduction. If you live or work in either city, your overtime is subject to the local tax on its full amount.
What the Federal Deduction Does Save You
Even without state relief, the federal deduction is worth claiming. A single filer can deduct up to $12,500 of qualified overtime compensation per year, and joint filers up to $25,000.1Internal Revenue Service. One, Big, Beautiful Bill Act: Tax Deductions for Working Americans and Seniors The deduction phases out above $150,000 in modified adjusted gross income for single filers and $300,000 for joint filers.4Internal Revenue Service. Guidance for Individual Taxpayers Who Received Qualified Tips or Overtime You can take it whether you itemize or use the standard deduction.5Internal Revenue Service. Treasury, IRS Provide Guidance for Individuals Who Received Tips or Overtime During Tax Year 2025
One point catches many workers off guard: only the overtime premium qualifies, not the full overtime wage. If your regular rate is $30 per hour and you earn $45 for overtime, only the extra $15 per hour is deductible. Ten overtime hours produce a $150 deduction, not $450. If your employer pays double time, only the half that satisfies the federal time-and-a-half requirement counts.6Internal Revenue Service. Questions and Answers About the New Deduction for Qualified Overtime Compensation
Here’s how the math works for a Missouri worker earning $25 per hour who puts in 10 hours of overtime a week for 50 weeks:
- Total overtime pay: 500 hours at $37.50, or $18,750 for the year.
- Qualified deduction amount: the $12.50 premium per hour, totaling $6,250.
- Federal tax savings at a 22% marginal rate: roughly $1,375.
- Missouri tax impact: none. The full $18,750 remains taxable at the state level.
Eligibility is tied to the Fair Labor Standards Act. You qualify if you’re a non-exempt employee receiving overtime at a rate of at least one and a half times your regular rate for hours over 40 in a workweek.7Office of the Law Revision Counsel. 29 U.S. Code 207 – Maximum Hours Salaried workers classified as exempt don’t qualify, and neither do bonuses or commissions not triggered specifically by overtime hours.8U.S. Department of Labor. Overtime Pay Most public safety workers do qualify, since they’re typically non-exempt. Married workers must file jointly to claim the deduction; filing separately disqualifies you.4Internal Revenue Service. Guidance for Individual Taxpayers Who Received Qualified Tips or Overtime
The deduction also does not reduce Social Security or Medicare taxes. Those payroll taxes still apply to your full earnings including overtime.
Is Missouri Likely to Pass Its Own Overtime Deduction?
Missouri lawmakers have tried. House Bill 860, filed for the 2025 legislative session, would have allowed a 100% deduction of overtime income from Missouri adjusted gross income. The bill did not advance and was listed as dead by May 2025. No comparable law had been enacted as of early 2026.
If a future bill becomes law, overtime pay could be partially or fully exempt from Missouri income tax. Until then, the state treats overtime earnings exactly like regular wages.
Mistakes to Avoid as a Missouri Filer
The most common error is assuming the federal overtime deduction will shrink your state tax bill. It won’t. If you’ve been budgeting as though both returns will show relief, your Missouri refund will come in smaller than expected, or you may owe more than you planned.
The second trap is treating your full overtime pay as the deduction amount. If your W-2 reports $15,000 in overtime earnings, your deductible amount is likely closer to $5,000, because only the premium half qualifies. Claiming the full figure invites an IRS correction and a delayed refund.
Finally, if you and your spouse normally file separately, run the numbers both ways. The overtime deduction isn’t available on a married-filing-separately return at all, and the loss may outweigh whatever reason you had for filing apart.4Internal Revenue Service. Guidance for Individual Taxpayers Who Received Qualified Tips or Overtime