Nurse Overtime Taxes by State in 2026

What a Median Nurse Earns — and What Overtime Is Worth

Quick answer: Registered nurses earned a median $97,550 per year, or $46.90 per hour, in May 2025 Bureau of Labor Statistics data. Mean pay was higher at $101,420 per year ($48.76 per hour), and California led the states with mean pay of $150,280. Enter your own total in the paycheck calculator to see the per-paycheck breakdown.

Nursing is one of the few professions where overtime is a normal, structural part of the job rather than an occasional bonus. Hospitals run around the clock, and when the night shift is short, someone picks up extra twelve-hour shifts at time-and-a-half. For a median nurse at $46.90 per hour, that overtime rate is approximately $70.35 per hour — every extra shift is worth half again as much as a base hour. Over a year, even a modest overtime habit adds up fast: just four extra hours a month at $70.35 is about $3,377 a year, and nurses who regularly pick up an extra shift each pay period can easily clear $9,000 or more in overtime pay.

The spread across states is wide. Mean registered-nurse pay reached $150,280 in California, far above the $101,420 national mean, reflecting both the state's high cost of living and its strong nurse staffing rules. A California nurse working the same overtime hours therefore generates a much larger overtime total than a nurse in a lower-wage state — and, as the state-layer section shows, also faces a much larger state tax bill on it. Understanding both halves of that equation is the point of this guide.

There is also a persistent myth worth killing early: overtime is not taxed at a higher rate than base pay. Your withholding on a big overtime paycheck looks brutal because payroll systems annualize that one check, but at filing time every dollar of wages — base or overtime — faces the same progressive federal brackets. What the OBBBA changes is narrower and better: a dedicated deduction for the premium half of qualifying overtime, explained next. Travel nurses should pay special attention here, because multi-state assignments can split income across different state returns — keep assignment-by-assignment pay records so each state's share is documented, and compare destinations with our state tax calculators before signing the next thirteen-week contract.

How the $12,500 Overtime Deduction Works (the Divide-by-Three Rule)

Quick answer: For tax years 2025 through 2028, individuals who receive qualified overtime compensation may deduct the pay that exceeds their regular rate of pay (generally, the half portion of time-and-a-half compensation) that is required by the Fair Labor Standards Act. Section 225(b)(1) limits this deduction to an amount not to exceed $12,500 per return ($25,000 in the case of a joint return) in a tax year.

Only the half-time premium qualifies — not the whole overtime check. When you work time-and-a-half, your pay has two parts: your regular rate (the "one") for the hour plus the premium (the "half"). The OBBBA lets you deduct only the premium half. The simplest way to isolate it: divide your total time-and-a-half overtime pay by three. That fallback comes straight from IRS guidance — without an employer statement breaking out the premium, total divided by three is the accepted method, as in the NLC example where $15,000 of overtime pay yields a $5,000 deduction.

Run the canonical nurse example. A median nurse earns $9,000 in time-and-a-half overtime pay during the year. Dividing by three gives a $3,000 premium deduction, comfortably under the $12,500 per-return cap ($25,000 joint). At the 22 percent marginal rate that applies to income in this range, the deduction saves about $660 in federal income tax (0.22 × $3,000). That is the real, repeatable value of the provision for a typical nurse: several hundred dollars a year, every year from 2025 through 2028, for overtime you were already working.

Three boundaries matter. First, only FLSA-required time-and-a-half premiums qualify — double-time and state daily-overtime premiums follow separate tracking rules, so do not assume they count. California daily-overtime rules, for example, create premium pay that is not necessarily FLSA-required, and the pack flags this as unverified for the deduction — track those hours separately and let the employer statement decide. Second, the deduction is federal income-tax only: overtime remains fully subject to Social Security and Medicare taxes, and your FICA withholding does not change. Third, married couples filing separately are ineligible entirely, so a nurse married to another earner should model joint filing — the $25,000 joint cap is also twice as generous as the $12,500 single cap, which matters when both spouses work overtime. To put a dollar figure on your own shifts, use our no tax on overtime calculator with your total overtime pay.

The State Layer: Why the Same Nurse Keeps Different Amounts

Quick answer: No state exempts overtime pay — the deduction is federal-only and every state taxes overtime wages normally. A nurse earning the $97,550 median plus $9,000 overtime ($106,550 total) keeps all of it from state tax in Texas, Florida, or Washington, but pays thousands in California or New York.

This is where state choice bites. Federal law gives every nurse the same $3,000 premium deduction on $9,000 of overtime, but state law decides what happens to the remaining pay. Nine states levy no income tax at all, so overtime earned in Texas, Florida, Washington, and their six peers faces zero state tax — the federal deduction is pure gain. High-tax states work the mirror image: California taxes overtime wages at progressive rates up to 13.3 percent, and New York applies its own steep brackets, so a California nurse on $150,280 mean pay can owe several thousand dollars more in state tax than an identical nurse in Texas.

Do not confuse withholding with tax. A big overtime check can show heavy withholding because payroll software annualizes the spike, but your actual liability is set at filing time by the brackets — the extra withholding comes back as a refund. The same logic applies in reverse to state taxes: confirm your withholding and reporting rules with your state revenue agency rather than reading one pay stub. A concrete comparison makes the stakes clear: a nurse on $106,550 total pay in Texas owes $0 in state income tax and keeps the full $660 federal overtime saving, while the same nurse in California can owe several thousand in state tax on identical earnings — dwarfing the federal deduction. Nurses considering travel contracts should compare states with our state tax calculators, and anyone with hospital bonus pay should also check the bonus tax calculator, since supplemental wages follow different withholding rules.

Reporting and Phaseout Checklist

Quick answer: 2025 reporting is optional — employer Box 14 entries are voluntary under IRS Notice 2025-62 — but 2026 and later reporting is mandatory with separate W-2/1099 premium figures. The full deduction needs MAGI of $150,000 or less ($300,000 joint), shrinking by 10 percent of each dollar above and vanishing at $275,000 single or $550,000 joint.

Start with the calendar. For 2025, employers may but need not break out the overtime premium — Box 14 entries are voluntary — so keep your own records: final pay stubs showing overtime hours and rates, plus any employer statement of the premium portion. From 2026, separate W-2/1099 reporting of qualified overtime becomes mandatory, which should make the divide-by-three fallback unnecessary for most filers. Either way, reconcile your records against your W-2 before filing and keep them for at least three years.

Next, check eligibility. You need a valid Social Security number, and married couples must file jointly — married filing separately is barred from the deduction entirely. Then test MAGI: at or under $150,000 single ($300,000 joint), you keep the full capped deduction; above that, it shrinks by 10 percent of each excess dollar until it disappears at $275,000 single ($550,000 joint). A median nurse earning $97,550 plus $9,000 overtime sits at about $106,550 — well under the threshold, keeping the full $3,000 and its roughly $660 saving at 22 percent.

Finally, remember the FICA line: overtime stays subject to Social Security and Medicare, so budget the same 7.65 percent regardless of the deduction. And because thresholds, forms, and employer-reporting rules are still bedding in, confirm the current-year mechanics in IRS guidance before you file.

Estimates only — not tax advice. OBBBA deductions apply to federal income tax for tax years 2025–2028, subject to caps, phaseouts, occupation, and IRS rules. State wage and tax rules change yearly; confirm with the DOL, BLS, IRS, or your state revenue agency before making work or relocation decisions.