Yes, Missouri does tax overtime pay, and it taxes it at the same rates as your regular wages. The federal One Big Beautiful Bill Act created a new deduction for qualified overtime compensation starting in 2025, but that deduction does not carry over to your Missouri return. Missouri calculates state tax beginning with your federal adjusted gross income, and the federal overtime deduction is applied below that line, so it never reaches the state calculation.1MU Extension. New Tax Break on Overtime Pay Comes With Limits
Why the Federal Overtime Deduction Skips Your Missouri Return
Missouri’s income tax starts with federal AGI, then applies the modifications listed in Section 143.121 of the Revised Statutes of Missouri.2Missouri Revisor of Statutes. Missouri Code 143.121 – Missouri Adjusted Gross Income The new federal deduction under Section 225 of the Internal Revenue Code is a below-the-line deduction, meaning it reduces federal taxable income without changing federal AGI.3Internal Revenue Service. One, Big, Beautiful Bill Act: Tax Deductions for Working Americans and Seniors
Because Missouri’s starting number never moves, every dollar of overtime you earn stays fully taxable to the state, including the premium portion that the federal government now lets you deduct.1MU Extension. New Tax Break on Overtime Pay Comes With Limits
What Missouri Charges on Overtime
Missouri’s top individual income tax rate for 2026 is 4.70%, with lower brackets starting at 2.00%. On $5,000 of overtime, that works out to roughly $200 or more going to the state, no matter what your federal return looks like.
Local earnings taxes stack on top of that. St. Louis and Kansas City both impose earnings taxes based on total earnings, and they are calculated independently of any federal deduction. If you live or work in either city, your overtime is subject to that local tax on the full amount too.
What the Federal Deduction Actually Gives You
The federal side is where the relief lives. The deduction is available for tax years 2025 through 2028 and can be claimed whether you itemize or take the standard deduction.4Internal Revenue Service. Treasury, IRS Provide Guidance for Individuals Who Received Tips or Overtime During Tax Year 2025
One detail catches people out: only the overtime premium qualifies, not the whole overtime paycheck. If your regular rate is $30 and you earn $45 for overtime hours, only the extra $15 per hour is deductible. Ten overtime hours at that rate 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.5Internal Revenue Service. Questions and Answers About the New Deduction for Qualified Overtime Compensation
The deduction caps at $12,500 for single filers and $25,000 for married couples filing jointly. It phases out above $150,000 in modified AGI for single filers and $300,000 for joint filers. You need a Social Security number valid for employment, and married couples must file jointly; filing separately disqualifies you.6Internal Revenue Service. Guidance for Individual Taxpayers Who Received Qualified Tips or Overtime
Eligibility is tied to the Fair Labor Standards Act. You qualify if you’re a non-exempt employee receiving overtime for hours beyond 40 in a workweek at a rate of at least one and a half times your regular rate.7Office of the Law Revision Counsel. 29 U.S. Code 207 – Maximum Hours Salaried exempt workers, bonuses, and commissions do not qualify.8U.S. Department of Labor. Overtime Pay
Payroll taxes are unaffected. Social Security and Medicare still apply to your full earnings, overtime included.
A Quick Missouri Example
Take a Missouri worker earning $25 per hour who logs 10 overtime hours a week for 50 weeks:
- Total overtime pay: 500 hours at $37.50, or $18,750 gross.
- Qualified federal deduction: the $12.50 premium per hour, totaling $6,250.
- Federal savings at a 22% marginal rate: roughly $1,375.
- Missouri tax impact: none. The state still taxes the full $18,750.
Could Missouri Change This?
Missouri lawmakers have looked at the question. House Bill 860, filed for the 2025 legislative session, proposed 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 legislation had been enacted as of early 2026.
If a future bill passes, it would change the state analysis. Until it does, Missouri treats overtime earnings identically to regular wages.
Common Mistakes at Filing Time
Assuming the federal deduction also lowers your Missouri bill is the most common error. If you normally get a Missouri refund, you may still owe the same amount to the state as before, even with a larger federal refund. Budget accordingly.
Confusing total overtime with the qualified deduction amount is the second. If your W-2 shows $15,000 in overtime earnings, your deductible amount is closer to $5,000, because only the premium portion counts. Claiming the full amount will trigger an IRS correction.
For the 2026 tax year and beyond, employers must separately report qualified overtime compensation on W-2s and 1099s, and the IRS is updating those forms to include a dedicated field.5Internal Revenue Service. Questions and Answers About the New Deduction for Qualified Overtime Compensation Keep your own log of overtime hours and rates anyway. Payroll systems are still catching up to the new reporting rule, and personal records make discrepancies easier to fix.
Married couples filing separately are shut out of the deduction entirely.6Internal Revenue Service. Guidance for Individual Taxpayers Who Received Qualified Tips or Overtime If you and your spouse usually file separately for other reasons, run the numbers both ways. The overtime deduction may be enough to tip the math toward a joint return.