The Payroll Division is responsible for managing the payroll function for all City of Dallas employees.
The Payroll Division processes employees' pay, monitors time entries, files payroll tax forms, produces W-2s and remits all benefit deductions.
We are pleased to share an important update regarding your federal tax benefits under the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025.
One of the key provisions of this legislation is the “No Tax on Overtime" rule, which directly impacts many of our hourly employees.
Effective Date: The provision applies to overtime earned on or after January 1, 2025.
Tax Benefit: Eligible employees can deduct up to $12,500 (Single filers) or $25,000 (Married Filing Jointly) of qualifying overtime pay from their federal taxable income.
This announcement does not constitute legal advice or tax advice and provides only a brief overview of the “No Tax on Overtime" rule. Not all overtime is eligible for an individual tax deduction. Employees should not rely solely on this announcement for information regarding the “No Tax on Overtime" rule and are encouraged to consult a licensed tax professional for additional information.
Eligibility:
You must be a W-2 hourly employee (not a contractor or salaried exempt employee).
Your overtime must meet The Fair Labor Standards Act (typically time-and-a-half for hours worked beyond 40 hours/week).
The deduction phases out for higher earners starting at $150,000 (Single) or $300,000 (Married Filing Jointly) in Modified Adjusted Gross Income (MAGI).
Duration: This provision is currently set to remain in effect through December 31, 2028, unless extended by Congress.
Payroll Reporting: The city will issue a written statement providing you with an overtime premium amount that has been calculated pursuant to city policy.
The Statement will be mailed to your home address in Workday no later than the week of January 26, 2026
Because City policy requires that certain paid leaves be included as hours worked for the purpose of calculating overtime, which is not required by the Fair Labor Standards Act, the overtime premium amount provided by the city may differ from the Internal Revenue Code's definition of “qualified overtime compensation" that is eligible for an individual tax deduction.
Tax Filing: When filing your 2025 taxes, consult a tax professional or use reputable tax software to ensure you claim the deduction correctly.
Questions: CCO Payroll will conduct several office hours during the months of January and February 2026 as needed to address your questions concerning No Tax on Overtime provision. In addition, we have included some FAQs to assist you.
Frequently Asked Questions (FAQ)
Who qualifies for this tax benefit?
All hourly W-2 employees who earn overtime pay under The Fair Labor Standards Act (typically time-and-a-half for hours worked over 40 per week) are eligible.
Is this benefit automatic?
No. While the City will provide you with an overtime premium amount, you must determine the portion of the overtime premium that is eligible for an individual tax deduction and claim the deduction when filing your federal income tax return.
Will this affect my paycheck?
No. Your paycheck will still reflect standard tax withholdings. The benefit is applied when you file your annual tax return.
How will I know how much overtime I earned?
The city will issue a written statement providing you with an overtime premium amount that has been calculated pursuant to city policy. Because the city includes certain paid leave as hours worked for the purpose of calculating overtime that is not required by the Fair Labor Standard Act, the amount of the overtime premium provided by the city may differ from the Internal Revenue Code's definition of “qualified overtime compensation" that is eligible for an individual tax deduction. You are encouraged to visit with CCO payroll staff at office hours, consult a licensed tax professional, and/or otherwise review your records to determine the portion of your overtime premium that is eligible for an individual tax deduction.
What if I work multiple jobs?
You may combine qualifying overtime from multiple W-2 jobs, but the total deduction is capped at $12,500 (Single) or $25,000 (Married Filing Jointly).
What if I exceed the income limit?
The deduction begins to phase out at $150,000 (Single) or $300,000 (Married Filing Jointly) in Modified Adjusted Gross Income (MAGI).
Do I need to submit anything to Payroll?
No action is required from you at this time.
Where can I get help filing my taxes?
We recommend consulting a licensed tax professional or using reputable tax software that supports the OBBBA provisions.
Payroll Quick Links
Payroll FAQs
Civilian Payroll Calendar
Uniform Payroll Calendar
IRS Tax Withholding Estimator
IRS Tax Tables
US Department of Labor
W-2 FAQs
W-2 Job Aid 2025