There is no tax on overtime in Louisiana in the sense most workers mean: a federal deduction created by the One Big Beautiful Bill Act lets you subtract up to $12,500 of qualified overtime pay ($25,000 on a joint return) from your taxable income for tax years 2025 through 2028.1Congress.gov. H.R.1 – 119th Congress (2025-2026): An Act to Provide for Reconciliation Because Louisiana calculates state income tax starting from your federal adjusted gross income, the deduction lowers your state bill at the same time, with no separate Louisiana form to file.
What the Deduction Actually Covers
The deduction applies only to the overtime premium, not your full overtime paycheck. When you earn time-and-a-half, the deductible portion is the extra “half” above your regular rate. If your regular rate is $20 an hour and you work 10 overtime hours at $30, you earned $300 in overtime pay, but only $100 of that counts as qualified overtime compensation.2Internal Revenue Service. Questions and Answers About the New Deduction for Qualified Overtime Compensation
The deduction took effect for taxable years beginning after December 31, 2024. The first year you could claim it was 2025. It is scheduled to expire at the end of 2028 unless Congress extends it. You can take it whether you itemize or use the standard deduction.3Internal Revenue Service. Treasury, IRS Provide Guidance for Individuals Who Received Tips or Overtime During Tax Year 2025
Who Qualifies
The overtime must be required under Section 7 of the Fair Labor Standards Act. In practice, you need to be covered by the FLSA and not exempt from its overtime rules. Most hourly workers fit. Salaried employees earning above the overtime salary threshold of $684 per week ($35,568 annually) who perform executive, administrative, or professional duties are generally exempt from FLSA overtime and cannot claim the deduction.4U.S. Department of Labor. Overtime Pay Voluntary overtime your employer chooses to pay, or overtime required only by state rules, does not count.1Congress.gov. H.R.1 – 119th Congress (2025-2026): An Act to Provide for Reconciliation
No industry is excluded. A retail cashier, a construction laborer, and a factory worker all qualify as long as they receive FLSA-mandated overtime.5Internal Revenue Service. One, Big, Beautiful Bill Act: Tax Deductions for Working Americans and Seniors
Two more rules apply. You need a Social Security number valid for employment on the return where you claim the deduction. And if you are married, you and your spouse must file jointly. There is no married-filing-separately option.2Internal Revenue Service. Questions and Answers About the New Deduction for Qualified Overtime Compensation
Income Limits
The deduction phases out once your modified adjusted gross income passes $150,000 for a single filer, or $300,000 for joint filers. For every $1,000 above the threshold, the deduction drops by $100. A single filer with modified AGI of $275,000 or more gets nothing.1Congress.gov. H.R.1 – 119th Congress (2025-2026): An Act to Provide for Reconciliation
How It Lowers Your Louisiana Tax
Louisiana uses your federal AGI as the starting point for state tax, so the federal overtime deduction carries through to your state return automatically. You do not file anything extra at the state level to pick it up.
Louisiana’s individual income tax is a flat 3% for tax years beginning January 1, 2025 and later.6Louisiana Department of Revenue. What Are the Individual Income Tax Rates and Brackets Claim the full $12,500 federal deduction and you save roughly $375 on your Louisiana bill in addition to your federal savings.
The 2024 Louisiana State Program
Louisiana ran its own, narrower overtime exemption under Act 393 of the 2023 Regular Session, which amended Louisiana Revised Statute 47:293. It applied only to the 2024 tax year and sunset on December 31, 2024. It was limited to full-time hourly workers in manufacturing, healthcare and social assistance, and transportation and warehousing, with a cap of $2,500 in overtime pay per year. If you worked overtime in 2024 and have not yet filed your 2024 state return, you may still claim it if you meet the requirements. For 2025 and later, this state program is gone.
What You Will Need at Filing Time
Starting with tax year 2026, employers are required to report your qualified overtime compensation separately on Form W-2, and the IRS has said Forms W-2, 1099-NEC, and 1099-MISC will be updated with a specific field for it.2Internal Revenue Service. Questions and Answers About the New Deduction for Qualified Overtime Compensation During the 2025 transition year employers were not required to break overtime out, so workers had to calculate the premium themselves from pay stubs. Hang on to your own pay records anyway in case the W-2 figure is wrong.
If you are filing a late 2024 Louisiana return to claim the state exemption, you will also need your employer’s NAICS code to show the business is in an approved industry. Payroll or HR can provide it.
Common Mistakes to Avoid
The biggest error is claiming the full overtime paycheck instead of just the premium. If you earned $8,000 in time-and-a-half overtime, only about $2,667 of that is the deductible premium. Entering the full $8,000 will trigger a correction and can delay your refund.
The second trap is filing status. Married couples must file jointly. Running the numbers before you pick a status matters, especially if separate filing helps you elsewhere, such as with income-driven student loan payments.2Internal Revenue Service. Questions and Answers About the New Deduction for Qualified Overtime Compensation
The third is assuming any overtime your employer pays qualifies. If the FLSA does not require the overtime (because you are exempt, or because it is purely voluntary on your employer’s part), the pay does not count toward the deduction even if it shows up on your check as “overtime.”