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No Tax on Overtime Calculator

Enter your rate and overtime hours. We split the premium from straight-time pay, apply the cap and income phase-out, and estimate your federal tax savings for 2025 to 2028.

Short answer: only the premium (the extra half in time and a half) is deductible, up to $12,500 single or $25,000 joint, and it phases out at higher incomes. It lowers federal income tax, not Social Security or Medicare tax.

Estimate only, not tax advice. Rules last reviewed 2026-10-21.

How do you want to enter overtime?
$

Include regular bonuses if your employer does.

Only the FLSA half-time premium counts, even at 2x.

Daily overtime not required by the FLSA is excluded.

Married filing separately is not eligible.

$

Estimated deduction

$3,600

Estimated federal income tax saved

$792

Overtime hours / year
288.0
Total overtime pay
$10,800
Qualified premium (extra half)
$3,600
Cap (single)
$12,500
Phase-out reduction
$0

Estimate only, not tax advice. Social Security and Medicare (about $275 on the premium) still apply, and state tax may differ. Rules reviewed 2026-10-21.

What if you work more overtime?

Extra deduction
$2,400
Extra federal tax saved
$528
Extra take-home (est.)
$5,593

Take-home = extra overtime pay minus federal tax at your bracket (after the deduction) minus 7.65% FICA. State tax is ignored.

Hourly vs salary: with the same rate, an hourly worker gets a deduction of $3,600 while a salaried worker on a fluctuating workweek (salary covers all hours) gets about $3,130, because the half-time premium is spread over every hour worked. Exempt salaried employees get no overtime premium and no deduction.

The rules this calculator uses

Qualified overtime deduction rules
RuleSingle / HoHMarried filing jointly
Annual cap$12,500$25,000
Phase-out starts at MAGI$150,000$300,000
Reduction$100 per $1,000 of MAGI above the threshold
Tax years2025 through 2028
Married filing separatelyNot eligible

Last reviewed 2026-10-21. Sources: IRS fact sheet, U.S. Department of Labor overtime rules.

Do I qualify?

0 of 5 confirmed. Unchecked items may stop you from claiming it.

How the no tax on overtime deduction works

Overtime pay is not tax-free. Instead, a portion of it becomes a deduction that lowers your taxable income. The deduction covers only the premium the FLSA requires, the extra half in time and a half. Your regular rate times your overtime hours is still taxed like any other wages.

  1. Find the premium. Overtime hours x regular rate x 0.5. Double time still only counts the 0.5, because the FLSA does not require more.
  2. Apply the cap. $12,500 single, $25,000 joint.
  3. Apply the phase-out. Subtract $100 for every $1,000 of MAGI above $150,000 ($300,000 joint).
  4. Estimate the savings. Multiply the deduction by your marginal bracket. This is a rough federal estimate, not a full return.

Payroll taxes are unaffected: Social Security and Medicare still apply to all overtime. State tax depends on your state. Rules last reviewed 2026-10-21.

No tax on overtime deduction examples

Moderate overtime

$25/hour, 6 overtime hours a week for 48 weeks, single, MAGI $70,000, 22% bracket.

Premium
$3,600
Deduction
$3,600
Federal tax saved
$792

Hitting the cap

$40/hour, 14 overtime hours a week for 52 weeks, single, MAGI $90,000, 24% bracket.

Premium
$14,560
Deduction
$12,500
Federal tax saved
$3,000

In the phase-out

$50/hour, 8 overtime hours a week for 40 weeks, single, MAGI $160,000, 24% bracket.

Premium
$8,000
Deduction
$7,000
Federal tax saved
$1,680

Overtime deduction summary for your tax preparer

Use Print preparer summary above for a one-page record of your inputs, the premium and every assumption. Come from the overtime calculator? Your premium arrives pre-filled. Track hours per pay period with the timecard calculator. Browse all free time and pay tools. Official guidance: IRS and U.S. Department of Labor.

No tax on overtime FAQ: who qualifies, the cap and W-2

What is the no tax on overtime deduction and who qualifies?

It is a federal income tax deduction for qualified overtime compensation, created by the One Big Beautiful Bill Act for tax years 2025 through 2028. You qualify if you are paid FLSA-required overtime as a W-2 employee, include a valid Social Security number on your return, do not file married filing separately, and your income is below the phase-out ceiling. You can claim it whether or not you itemize.

Is all overtime pay deductible or only the premium (half-time) portion?

Only the premium portion. When you earn time and a half, the straight-time part (1.0x) is ordinary wages and stays fully taxable. Only the extra half (0.5x) that the Fair Labor Standards Act requires counts as qualified overtime compensation. This calculator separates the two for you.

What is the maximum deduction and how does the income phase-out work?

The cap is $12,500 for single filers and $25,000 for joint filers. The deduction starts shrinking when modified AGI passes $150,000 ($300,000 joint), by $100 for every $1,000 above that line. Because it is a dollar-for-dollar reduction of the deduction, high earners with a small premium can lose it sooner.

Do I still pay Social Security and Medicare (FICA) tax on overtime?

Yes. The deduction only affects federal income tax. All overtime is still subject to Social Security and Medicare payroll tax (7.65% employee share), so your paycheck deductions for FICA do not change.

Does California daily overtime or other state-only overtime qualify?

Overtime that is required only by state law, such as California daily overtime after 8 hours in a day, is generally not FLSA overtime, so it likely does not count. Hours over 40 in a workweek do. Treat this as something to confirm with the IRS guidance or a preparer. The calculator has a field to exclude state-only hours.

How do I claim the deduction on my tax return, and where does it show on my W-2?

You claim it on your federal return with the new deduction schedule that the IRS provides for these deductions. Employers must report total qualified overtime paid, and the IRS has said 2025 has transition relief, so your 2025 W-2 may not show a separate figure. If it does not, use your payslips or ask your employer for the premium total, and print the summary from this page for your preparer.

Will my employer stop withholding tax on my overtime?

Not automatically. The deduction is claimed when you file, so your withholding on overtime usually stays the same and you receive the benefit as a larger refund or smaller balance due. You can adjust your W-4 if you want to see the effect in your paychecks.

Does it apply to my 2025 return, my 2026 return, and until when?

It applies to tax years 2025 through 2028. Overtime you earned in 2025 is claimed on the return you file in early 2026, and 2026 overtime on the return you file in 2027. It is scheduled to end after 2028 unless Congress extends it.

Does the deduction reduce my state income tax?

Not necessarily. It is a federal deduction. Some states conform to federal taxable income and some do not, and a few have their own rules. This calculator estimates federal income tax only, so check your state tax agency.

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