CALIFORNIA · AS OF AUGUST 2026
No tax on overtime in California? Two catches you need to know.
California workers face the most confusing version of this law in the country, because two separate problems stack: California doesn't conform to the federal deduction, and much of California overtime doesn't even qualify federally. Here's exactly where CA workers stand.
Catch #1. California still taxes every overtime dollar.
California's income tax starts from federal AGI, and the federal overtime deduction sits below AGI, so it never reaches the CA return. On top of that, California's conformity date (January 1, 2025, set by S.B. 711 in October 2025) deliberately pre-dates the OBBBA. The Franchise Tax Board has said it plainly: California generally does not conform to the OBBBA. Result: your overtime premium is deductible federally, but fully taxed by California at 1% to 12.3%.
Two bills would change this. AB 1550 (conformity for 2026-2028) and AB 2336 (its own $25,000 overtime exclusion), but neither is law as of August 2026. We track both on the updates page.
Catch #2. CA daily overtime doesn't qualify federally either.
The federal deduction covers only overtime required by the federal FLSA: hours over 40 in a workweek. California Labor Code §510 requires much more, and that extra state-only overtime is not qualified:
| Overtime type | Required by | Federal deduction? |
|---|---|---|
| Hours over 40 in the workweek (1.5×) | FLSA + CA | ✓ The 0.5× premium qualifies |
| Over 8 hrs/day in a ≤40-hr week (1.5×) | CA only | ✕ No |
| 7th consecutive day premium, ≤40-hr week | CA only | ✕ No |
| Double-time (over 12 hrs/day), hours also over 40/week | CA (2×) / FLSA (1.5×) | ◐ Only the 0.5× federal slice |
| Double-time in a ≤40-hr week | CA only | ✕ No |
As employment-law firm Fisher Phillips puts it: overtime required by California law but not by the FLSA "is not qualified overtime compensation." Calculators that let CA workers dump in their total overtime pay silently overstate the deduction, ours asks for federal overtime hours specifically.
Example: a 4×10 schedule vs. a 50-hour week.
4 × 10-HOUR DAYS (40 HRS)
8 daily-OT hours per week at 1.5× under CA law, but the week never passes 40 hours. Federal deduction: $0. CA tax: applies to all of it.
5 × 10-HOUR DAYS (50 HRS)
10 hours over 40 are federal overtime. At $30/hr, the 0.5× premium is $150/week - about $7,500 deductible over 50 weeks (within caps/limits).
What to do as a California worker.
- 1.Tally only hours over 40 per workweek from your pay records, per week, not per day.
- 2.Enter those in the calculator (double-time hours over 40/week go in the double-time field).
- 3.Claim the federal deduction on Schedule 1-A. Expect no CA benefit, budget accordingly.
FAQ.
Does California have no tax on overtime?
No. California taxes all overtime pay under its regular income tax (1%-12.3%). The state's conformity date deliberately pre-dates the federal law, so the federal deduction gives zero California benefit. Two bills are pending but not law as of August 2026: AB 1550 (conformity) and AB 2336 (a standalone overtime exclusion).
Does my California daily overtime count for the federal deduction?
Only if the same hours are also federal overtime (over 40 in the workweek). Daily OT (over 8 hours in a day) inside a week that stays at or under 40 total hours is required by California law only, so its premium does not qualify federally.
What about California double-time?
For hours that ARE federal overtime (over 40/week), only the 0.5× federal premium qualifies, not the full 1.0× extra of double-time. For double-time hours in an under-40 week, nothing qualifies.
So what should a California worker enter in the calculator?
Count only hours over 40 per workweek as your overtime hours. Ignore daily-OT hours from weeks at or under 40 total, and enter double-time hours (over 40/week) separately, the calculator applies the correct ÷4 treatment.
Sources: FTB Tax News (March 2026); S.B. 711 (2025); CA Labor Code §510; Fisher Phillips California employer guidance; California Legislature (AB 1550, AB 2336). Educational content, not tax advice. Reviewed August 2026 by the NoTaxOnOvertimeCalc Team.