No Tax on Overtime in Michigan: What Qualifies and What Doesn't
The federal deduction works the same dollar math everywhere. What's genuinely different in Michigan is whether your overtime pay is the kind that qualifies, and whether Michigangives you any benefit on your state return too.
For most people this is the AGI on Form 1040, line 11.
$22.00/hr × 0.5 = $11.00 premium per OT hour × 240 hours = $2,640.00 qualified overtime.
Qualified overtime compensation (the premium portion only)
$2,640.00
Your deduction cap
$12,500.00
Your deduction
$2,640.00
Estimated federal tax saved
$580.80
FICA on your overtime (still withheld — not affected by this deduction)
$201.96
This is a deduction, not an exemption. Your employer still withheld income tax on this overtime during the year. The benefit shows up as a larger refund or smaller balance due when you file.
This is an estimate, not tax advice. Figures are based on published IRS guidance for tax years 2025–2028. Your actual deduction depends on your full return. Confirm with a tax professional or the IRS before filing. Nothing you enter here leaves your browser.
Reviewed by Saurabh Sharma and Ashay Saraswat · last verified August 31, 2026 against IRS guidance.
Does Michigan overtime qualify for the federal deduction?
Michigan's Improved Workforce Opportunity Wage Act (MCL 408.934a) sets the same 40-hour weekly threshold as the FLSA. Effectively all overtime pay in Michigan is FLSA-required and qualifies for the federal deduction.
Source: Michigan Compiled Laws §408.934a (Improved Workforce Opportunity Wage Act)· verified 2026-08-31.
Does Michigan follow the federal deduction on your state return?
Michigan Public Act 24 of 2025 (signed October 7, 2025) added a state-specific deduction: Michigan residents may deduct on their MI-1040 the same qualified overtime compensation and qualified tips amounts they deducted on their federal return. Nonresidents may deduct only the portion attributable to services performed in Michigan. Critically, this deduction is only available for tax years 2026, 2027, and 2028 — it does NOT apply to tax year 2025, so 2025 W-2s/returns get no Michigan-side benefit even though the federal deduction is already in effect for 2025.
Yes, starting tax year 2026 only. Zero benefit for tax year 2025.
Source: Michigan Public Act 24 of 2025; Michigan Department of Treasury, "New Deductions for Qualified Overtime Compensation and Qualified Tips"· last verified 2026-08-31.
How overtime works in Michigan
- 1.5x regular rate for hours worked beyond 40 in a workweek, for employers with 2+ employees. No daily overtime threshold.
What this is worth to a Michigan worker
Take a single filer earning the latest published national median hourly wage of $24.51/hr (a Michigan-specific median wasn't available from BLS's own site this session — this uses the national figure rather than guessing a state number), working 5 overtime hours a week for the full year (260 hours). The premium portion is 0.5 × $24.51 × 260 hours = $3,186.3 in qualified overtime.
At a $45,000 MAGI, single filer, well under the $150,000 phase-out threshold, the full $3,186.3 deduction applies (it's under the $12,500 cap too), saving an estimated $382.36 in federal tax.
On the Michigan state return: Yes, starting tax year 2026 only. Zero benefit for tax year 2025.
Frequently asked questions
Does overtime in Michigan qualify for the federal no tax on overtime deduction?
Yes, effectively all of it. Michigan's Improved Workforce Opportunity Wage Act (MCL 408.934a) sets the same 40-hour weekly threshold as the FLSA. Effectively all overtime pay in Michigan is FLSA-required and qualifies for the federal deduction.
Does Michigan have its own state-level "no tax on overtime" deduction?
No. Yes, starting tax year 2026 only. Zero benefit for tax year 2025.