No Tax on Overtime in Tennessee (2025-2028)

On $6,497 of overtime premium

You save $1,429 — and Tennessee takes none of it

Worked on Tennessee's own average wage ($70,381, about $34/hour per BLS) with 8 overtime hours a week for 48 weeks. The OBBBA deduction cuts your federal tax. FICA is never touched: $497 of Social Security and Medicare on those hours.

What the new federal overtime deduction actually saves you — and what it does not.

2025–2028

Federal tax saved

per year, at filing

$1,234FICA still owed on it

7.65% of your overtime — the deduction does not touch it

Of your $16,128 overtime pay a year

$13,355You keep82.8%
$1,539Federal9.5%
$1,234FICA7.7%

Enter your overtime

Regular hourly rate

Overtime hours per week

Weeks of overtime per year

Filing status

State (for state tax)

Overtime pay for the year (gross): $16,128
Qualifying premium (the half of time-and-a-half): $5,376
Deduction applied (Schedule 1-A): $5,376
Federal tax without the deduction: $7,531
Federal tax with the deduction: $6,348
Take-home for the year: $62,331

Estimates only. Not tax or legal advice. Consult a professional. Models FLSA time-and-a-half: the deductible premium is half your regular rate per overtime hour, capped and phased out per Schedule 1-A.

How the split moves with your overtime

Single filer on $70,381 of straight-time pay in Tennessee, tax year 2026. The last row is the deduction cap.

Overtime premium	Federal saving	Tennessee tax	FICA	Net benefit
$2,000	$440	—	−$153	$440
$4,000	$880	—	−$306	$880
$6,000	$1,320	—	−$459	$1,320
$8,000	$1,760	—	−$612	$1,760
$12,500	$2,750	—	−$956	$2,750

Tennessee has no state income tax. Informational estimate, not tax advice.

Overtime and OBBBA in Tennessee

Does Tennessee tax my overtime in 2026?

No. Tennessee levies no state income tax, so your overtime only meets federal tax and FICA. The federal OBBBA deduction reaches you whole.

So is overtime actually tax-free?

Not quite, and the name oversells it. The deduction covers only the PREMIUM half of time-and-a-half, caps at $12,500 for a single filer, phases out above $150,000 of income, and never touches FICA: in this example you pay $497 in Social Security and Medicare on those hours regardless.

What do I actually save in Tennessee?

On $70,381 of straight-time pay plus $6,497 of overtime premium: $1,429 off your federal bill, with nothing clawed back at state level. Real net effect of the deduction: $1,429.

Where does this show up on my W-2?

Your employer reports qualified overtime in W-2 box 12 under code TT. That figure is what carries to Schedule 1-A; if the box is empty, ask your employer to correct it before you file.

Compare with nearby states

Kentucky 3.5%Florida no tax Texas no tax Alabama 2%–5%Arkansas 2%–3.7%All states

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