No Tax on Overtime Calculator

The phrase "no tax on overtime" made headlines when the One Big Beautiful Bill Act passed in July 2025, but the actual rule is narrower than the slogan — and that gap catches a lot of people off guard at filing time. Only the overtime premium is deductible: if you earn $20 an hour and time-and-a-half pays you $30, the extra $10 is what counts, not the whole $30. The deduction is capped at $12,500 for single filers and $25,000 on a joint return, it shrinks once your modified adjusted gross income passes $150,000 ($300,000 married filing jointly), and it only applies for tax years 2025 through 2028. Payroll taxes — Social Security and Medicare — still come out of every overtime dollar. This calculator does the honest version of the math: enter your regular rate, your typical overtime hours, and your income, and it shows the premium you actually earn, how much survives the cap and phase-out, and roughly what that saves you in federal income tax at your bracket.

Misjudging this deduction cuts both ways. Some workers assume their entire overtime check is tax-free and are disappointed by a refund far smaller than expected. Others don't realize the deduction exists at all — it's above-the-line, so you get it even if you take the standard deduction, which most hourly workers do. If you regularly log eight or ten overtime hours a week, the deduction is often worth $1,000–$2,500 a year in real federal tax savings. Knowing the number ahead of time also helps you decide whether adjusting your W-4 withholding makes sense, rather than giving the IRS an interest-free loan until your refund arrives.

The premium is only the portion above your regular rate — for time-and-a-half, that's half your base rate for each overtime hour. The cap is $12,500 (single or head of household) or $25,000 (married filing jointly). If your MAGI exceeds $150,000 ($300,000 joint), the allowed amount drops by $100 for every $1,000 over the threshold. Your tax savings equal the surviving deduction multiplied by your marginal federal rate, because this is a deduction, not a credit.

1. Enter your regular hourly rate. Use your base rate before any overtime multiplier — the number on your pay stub for straight time.
2. Enter overtime hours and weeks. A typical week's overtime hours and how many weeks a year you actually work overtime. If it varies, use a conservative average.
3. Set the multiplier. 1.5 for standard time-and-a-half. Change it to 2 if you get double time for Sundays or holidays — the deductible premium doubles too.
4. Add filing status and MAGI. Your modified adjusted gross income drives the phase-out. If you're not sure, last year's AGI is usually close enough for an estimate.
5. Pick your tax bracket. Your marginal federal bracket converts the deduction into actual dollars saved. Most overtime-heavy earners fall in the 12% or 22% bracket.

• Treating all overtime pay as tax-free. Only the premium above your regular rate qualifies — for time-and-a-half, that's one-third of your overtime paycheck, not all of it.
• Forgetting payroll taxes. Social Security and Medicare (7.65%) still apply to every overtime dollar; the deduction only reduces federal income tax.
• Assuming state income tax follows. Many states have not adopted the federal deduction, so your state return may tax overtime exactly as before.
• Missing the FLSA requirement. The deduction covers overtime required under the Fair Labor Standards Act. Overtime paid purely by contract or state daily-overtime rules beyond FLSA may not qualify — check with a tax professional if your situation is unusual.
• Ignoring the 2028 sunset. The deduction expires after tax year 2028 unless Congress extends it, so don't build long-term plans around it.

• The deduction is above-the-line via Schedule 1-A — you can claim it and still take the standard deduction.
• If both spouses work overtime, filing jointly gives you a combined $25,000 cap and a much higher $300,000 phase-out threshold.
• Employers now report qualified overtime separately on your W-2. Check that box matches your own records before filing.
• If the deduction is worth over $1,000 to you, consider trimming your W-4 withholding rather than waiting for the refund.
• Track double-time hours separately — the premium there is your full base rate per hour, twice as valuable as time-and-a-half hours.

The overtime deduction is a genuine tax cut for hourly workers, just a smaller one than the slogan suggests. Run your real numbers: know your premium, check the cap and phase-out, and multiply by your bracket. For most people with regular overtime the answer lands between one and three thousand dollars a year through 2028 — worth claiming correctly, and worth not overestimating.

• No Tax on Tips Calculator — the companion deduction for tipped workers
• Paycheck Calculator — see your full take-home pay per check
• Income Tax Calculator — estimate your total federal tax bill
• Overtime Pay Calculator — calculate your gross overtime earnings first
• Hourly to Salary Calculator — convert hourly pay to annual salary

• IRS — One Big Beautiful Bill provisions (irs.gov) — Official IRS guidance on the overtime and tips deductions
• US Department of Labor — Overtime pay (FLSA) (dol.gov) — What counts as FLSA overtime