No Tax on Overtime Ohio 2026: Federal Deduction vs Ohio's 2.75% State Tax

Ohio Overtime Workers: Federal Relief, But State Tax Still Applies

Ohio is home to a large manufacturing, logistics, and shift-work economy — auto plants, steel mills, warehouses, and hospitals across Columbus, Cleveland, Cincinnati, and Toledo routinely generate significant overtime hours. In 2026, Ohio overtime workers get real federal relief through the One Big Beautiful Bill Act (OBBBA), which created a deduction of up to $12,500 (single) or $25,000 (married filing jointly) on qualifying overtime premium pay. But unlike Nevada or Texas, Ohio is not a no-income-tax state — Ohio still taxes overtime income under its own flat state rate, and no Ohio-level overtime exemption currently exists.

This guide breaks down exactly how the federal OBBBA overtime deduction works for Ohio filers, what Ohio's current 2026 state income tax rate actually is, the status of Ohio House Bill 39 (a proposed state-level overtime deduction that has not been enacted), and how much Ohio workers actually keep after both federal and state tax — with three worked dollar-amount examples at different overtime income levels.

What Is the OBBBA Overtime Deduction?

The One Big Beautiful Bill Act (OBBBA) created a new federal above-the-line deduction for qualifying overtime premium pay, in effect for tax years 2025 through 2028. Key rules for 2026:

• Amount: Up to $12,500 for single filers, or $25,000 for married filing jointly, per year.
• What qualifies: Only the FLSA overtime premium — the extra 0.5× portion of pay for hours worked beyond 40 in a workweek by non-exempt employees — qualifies. The regular hourly-rate portion of overtime pay does not count toward the cap.
• Type: This is a deduction, not a credit. It reduces the income your federal tax brackets are applied to; it does not directly subtract from your tax bill.
• FICA is unaffected: Social Security (6.2%) and Medicare (1.45%) still apply to all overtime pay in full.
• Phase-out: The deduction phases out for single filers with AGI above $150,000 and married filing jointly above $300,000.
• Sunset: Scheduled to expire after tax year 2028 unless Congress extends it.

Does Ohio Tax Overtime Pay?

Yes. Ohio has no state-level exemption for overtime income. Overtime pay is treated exactly the same as regular wages under Ohio's income tax code — it is included in Ohio taxable income and taxed at Ohio's standard state rate. The federal OBBBA deduction only affects your federal return; it has no automatic effect on your Ohio state return, because Ohio's income tax calculation starts from federal AGI but Ohio does not currently provide its own overtime-specific deduction to offset the difference.

A bill — Ohio House Bill 39, "Allow state income tax deduction for overtime wages" — has been introduced in the Ohio General Assembly to create a state-level overtime deduction mirroring the federal one. As of 2026, HB 39 remains pending in committee and has not been enacted into law. Ohio overtime workers should not assume a state deduction applies unless and until this bill passes.

Ohio's 2026 State Income Tax Rate: What Changed

Ohio significantly simplified its income tax structure for tax year 2026. Under Ohio House Bill 96, signed by Governor Mike DeWine on June 30, 2025, Ohio moved from a two-bracket system (2.75% and a higher top rate that had been declining from 3.5% in 2024 to 3.125% in 2025) to a single flat rate for 2026 and beyond:

• $0 – $26,050: 0% (tax-free threshold)
• Above $26,050: Flat 2.75% on all nonbusiness income, with no higher bracket

This flat 2.75% rate applies equally to regular wages, overtime pay, salary, and most other nonbusiness income. There is no separate, lower rate for overtime hours — every dollar of overtime premium and base overtime pay above the $26,050 threshold is taxed at the same 2.75% Ohio rate as regular income. Note that over 600 Ohio municipalities also levy local income taxes (commonly 1.5%–2.5%, with some cities like Columbus and Cleveland at 2.5%), which apply on top of the state rate and are unaffected by either the OBBBA or Ohio's flat-tax reform.

Worked Example 1: $55k Base + $6k Overtime Premium ($61k Total)

Scenario: Single filer, Ohio resident (no local city tax assumed for simplicity), $55,000 base salary + $6,000 in FLSA overtime premium = $61,000 gross income.

Ohio taxable income calculations are simplified estimates; actual Ohio AGI starts from federal AGI with Ohio-specific additions/subtractions that may apply. Always verify with the Ohio Department of Taxation or a tax professional.

Worked Example 2: $60k Base + $10k Overtime Premium ($70k Total)

Scenario: Single filer, Ohio resident, $60,000 base salary + $10,000 in FLSA overtime premium = $70,000 gross income.

Figures are rounded, illustrative estimates. Ohio's flat 2.75% rate applies to the full amount regardless of the federal OBBBA deduction, since Ohio has not enacted its own overtime deduction (HB 39 pending).

Worked Example 3: $80k Base + $22k Overtime Premium ($102k Total, MFJ)

Scenario: Married filing jointly, Ohio resident, $80,000 base salary + $22,000 in FLSA overtime premium = $102,000 gross income.

MFJ standard deduction figure is an approximate 2026 projection. Ohio state tax applies to the full $102,000 above the $26,050 threshold, unaffected by the federal deduction. Verify your exact figures with a tax professional.

Ohio House Bill 39: Would It Create a State Overtime Deduction?

Ohio House Bill 39 proposes allowing a state income tax deduction for overtime wages, intended to mirror the federal OBBBA overtime deduction at the state level. If enacted, it would reduce Ohio taxable income by the amount of qualifying overtime premium, similar to how the federal deduction reduces AGI. As of 2026, HB 39 has not passed and remains pending in the Ohio legislature. Ohio overtime workers should continue to assume their overtime is fully subject to the state's flat 2.75% rate unless and until HB 39 (or similar legislation) is signed into law. Check the Ohio General Assembly's bill tracker for the current status before filing.

FLSA Overtime Rules in Ohio

Ohio follows the federal Fair Labor Standards Act (FLSA) for overtime eligibility — there is no separate Ohio state overtime law with different thresholds. Key rules:

• Threshold: Non-exempt employees must receive 1.5× their regular rate for hours worked beyond 40 in a single workweek.
• No daily overtime rule: Unlike California, Ohio has no daily overtime trigger — only the weekly 40-hour threshold matters.
• Exempt vs non-exempt: Salaried employees earning below the FLSA salary threshold, or hourly workers, are generally non-exempt and entitled to overtime. Executive, administrative, and professional employees meeting the duties test are typically exempt regardless of hours worked.

For Ohio's large manufacturing, logistics, healthcare, and warehouse workforce, FLSA overtime rules and the OBBBA federal deduction apply in full — even though Ohio's own state tax does not currently offer a matching break.