No Tax on Overtime by State

The deduction only covers overtime required by the federal Fair Labor Standards Act (FLSA) — generally hours worked beyond 40 in a week. Most states don't add anything beyond that, so effectively all of their overtime pay qualifies. A handful of states — California, Alaska, Nevada, and Colorado among them — also mandate overtime on a daily basis (for example, hours beyond 8 in a single day), and that state-mandated portion doesn't qualify for the federal deduction even though it shows up as overtime pay on the paystub.

Separately, the federal deduction reduces your federal taxable income only. Whether your state gives you any matching benefit depends on how that state's own tax return is built: some states never see the deduction in the first place because their tax base starts from federal AGI (above where this deduction is taken), some have specifically opted out with an addback, one has passed its own separate state-level deduction, and nine states have no wage income tax at all, so there's no state question to answer.