If you’ve spent any time lately scrolling through news feeds or chatting by the water cooler, you’ve probably heard the rumors. There is a lot of buzz about "tax-free overtime" hitting the paycheck. For folks in Ohio—from the steel mills in Youngstown to the tech hubs in Columbus—this sounds like a dream. But honestly, the reality is a bit more of a "yes, but" situation than most of those viral headlines lead you to believe.
So, when does no tax on overtime start in Ohio? Technically, for federal taxes, it already has. For state taxes? That’s where things get kinda messy.
The Big Federal Shift: The One Big Beautiful Bill Act
The biggest piece of this puzzle isn't actually an Ohio law, but a federal one. On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law. This is the heavy hitter that everyone is talking about.
It basically says that if you are a non-exempt worker (meaning you get paid by the hour or earn a lower salary that qualifies you for overtime), you can stop paying federal income tax on a chunk of those extra hours.
Here is the kicker: it’s retroactive to January 1, 2025.
That means if you were grinding out 50-hour weeks last summer, you might actually be looking at a nice deduction when you file your taxes this year. This federal break is currently slated to run through December 31, 2028. After that, unless Congress decides they like it enough to keep it, it vanishes like a buckeye in a bowl of candy.
Ohio’s State Tax: The HB 39 Hurdle
Now, just because the federal government says "cool, no tax" doesn't mean the state of Ohio automatically follows suit. Ohio has its own state income tax, and as of early 2026, the state is still debating its own version of this break.
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There is a specific piece of legislation you should keep an eye on: Ohio House Bill 39.
Introduced by Representatives Fischer and Santucci, this bill aims to amend section 5747.01 of the Revised Code. In plain English? It wants to allow an Ohio state income tax deduction for overtime wages.
As of right now, HB 39 is still working its way through the legislative meat grinder. It was referred to the Ways and Means Committee in February 2025. While federal law has already pulled the trigger, Ohio state tax is still being collected on overtime pay unless this bill—or a similar one—crosses Governor DeWine’s desk.
How the Money Actually Works (The "Half" Rule)
Don't expect your entire overtime check to be tax-free. That’s a common misconception that’s going to break some hearts come tax season.
The federal law (and the proposed Ohio bill) generally targets the premium portion of your overtime.
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Let's say you make $20 an hour. Your overtime rate is $30 (time-and-a-half).
- The $20 is your "regular" rate.
- The extra $10 is the "premium."
The tax deduction mostly applies to that extra $10. You still pay taxes on the base $20 part of that hour. It’s better than nothing, but it isn’t a total "get out of taxes free" card.
Are You Even Eligible?
The "No Tax on Overtime" perk isn't for the C-suite. It’s designed for the people actually punching the clock. To get the federal deduction—and eventually the Ohio one if it passes—you usually have to meet a few strict criteria:
- The W-2 Rule: You’ve got to be a standard employee. If you’re a 1099 contractor, this usually doesn't apply to you because you aren't technically "overtime eligible" under the Fair Labor Standards Act (FLSA).
- The Income Cap: If you’re a high roller making over $150,000 (single) or $300,000 (married filing jointly), the deduction starts to disappear. It phases out completely once you hit $275,000 for individuals.
- The $12,500 Limit: You can’t just work 100 hours a week and pay zero tax. The federal deduction is capped at $12,500 per year for individuals ($25,000 for joint filers).
What About Social Security and Medicare?
This is the part that bites. Even if Ohio passes HB 39 and the federal OBBBA is in full swing, you are still paying payroll taxes.
Social Security and Medicare (FICA) taxes are not part of this deal. Those are still coming out of every single overtime dollar you earn. Uncle Sam still wants his cut for the safety nets, even if he’s giving you a break on the income tax side.
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Why Ohio Payroll Departments Are Sweating
If you think it’s confusing for you, imagine being the person in the payroll office.
Because the federal law was passed in the middle of 2025 but made retroactive to the start of the year, companies have been scrambling. They have to find a way to report "Qualified Overtime Compensation" (QOC) separately on your W-2.
For the 2025 tax year, the IRS basically said, "Do your best." They’ve allowed employers to use Box 14 on the W-2 or a separate statement. But starting in 2026, it’s mandatory. You’ll likely see a new code in Box 12 of your W-2 specifically for this.
What You Should Do Right Now
Waiting for the state of Ohio to make a final move on HB 39 is a bit like watching paint dry, but you can’t afford to ignore the federal side.
First, check your pay stubs. Make sure your employer is actually tracking your overtime as a separate line item. If it’s all lumped together, you’re going to have a nightmare of a time claiming that deduction when you file.
Second, talk to your tax person early. This isn't a standard "push a button on TurboTax" year for many hourly workers. You need to ensure the "Qualified Overtime" is properly excluded from your Adjusted Gross Income (AGI).
Lastly, keep an eye on the statehouse in Columbus. Ohio often aligns its tax code with federal changes to keep things simple, but they haven't officially crossed the finish line on overtime yet. Until they do, keep a few dollars aside for the state, even if the feds are letting you keep more of your hard-earned cash.
The "no tax" era has started for federal returns, and while Ohio is lagging slightly behind on the state level, the momentum is clearly moving toward giving the 40-hour-plus crowd a much-needed break.