No Tax on Overtime Calculator

Q: Is overtime pay really tax free now?

No. Overtime is still taxed. The new law gives you a deduction , not a tax exemption. You subtract part of your overtime pay from your income, which lowers your federal income tax. You still owe Social Security tax, Medicare tax, and most likely state tax on all of your overtime pay.

Q: How do I figure out the premium part of my overtime pay?

Take your base hourly rate and cut it in half. That half is your premium per overtime hour. Then multiply it by your overtime hours for the year. Example: $30 an hour base pay means a $15 premium. Work 300 overtime hours and your qualified overtime is $4,500.

Q: Does double-time pay give a bigger overtime deduction?

No. The deduction only covers the half-time premium the Fair Labor Standards Act requires. At double-time you get an extra full hour of pay, but only 0.5x of it counts as qualified overtime. The rest is taxed like normal wages.

Q: Do I have to itemize to claim the overtime deduction?

No. You can take the standard deduction and still claim the overtime deduction. It sits on top of your standard deduction, so nearly every overtime worker can use it.

Q: Will my paycheck get bigger because of the overtime deduction?

Probably not by much. Most payroll systems keep withholding federal tax on overtime the same way. The benefit usually shows up when you file your return, as a larger refund or a smaller bill. You can adjust your Form W-4 if you want more money in each check instead.

Q: Where is qualified overtime shown on my W-2?

Employers report qualified overtime in Box 14 of your W-2 or on a separate statement. For 2025 the IRS allows some flexibility, so if your W-2 does not list it, add up the premium amounts on your paystubs and ask your payroll department to confirm.

Q: At what income do you lose the overtime deduction completely?

Single filers lose all of it near $275,000 of MAGI. Married couples filing jointly lose all of it near $550,000 . The drop starts at $150,000 single and $300,000 joint, falling $100 for every $1,000 of income above the line.

Q: Why can't married filing separately claim the overtime deduction?

The law simply leaves that filing status out. If you file separately from your spouse, you get no overtime deduction at all. Couples who both work overtime usually do better filing jointly, since they share a $25,000 cap.

Q: Can both spouses claim overtime pay on a joint return?

Yes, but you share one cap. A married couple filing jointly can deduct up to $25,000 of combined qualified overtime premium. If one spouse has $18,000 and the other has $9,000, you deduct $25,000, not $27,000.

Q: What years does the no tax on overtime deduction cover?

Tax years 2025 through 2028 . The first return you can claim it on is your 2025 return, filed in early 2026. It ends after 2028 unless Congress votes to extend it.

No Tax On Overtime Calculator

Introduction

The No Tax on Overtime Calculator shows how much you can save on federal income tax from your overtime pay. The One Big Beautiful Bill Act (OBBBA) created a new tax deduction for overtime. It starts with tax year 2025 and ends after 2028.

Here is the key part: only the extra half of your overtime pay counts. If you earn $28 an hour and get time and a half, your overtime rate is $42. The first $28 is normal pay. The extra $14 is the premium, and that is the part you can deduct.

There are limits. You can deduct up to $12,500 if you are single, or $25,000 if you are married and file together. The deduction gets smaller once your income passes $150,000 (single) or $300,000 (married filing jointly). People who file as married filing separately cannot use it at all.

Enter your pay rate, your overtime hours, and your income. From those three numbers the calculator works out your overtime tax deduction, your estimated tax savings, your tax bracket, and a step-by-step breakdown of the math. You can also add 401(k), HSA, IRA, and other details for a closer estimate.

This deduction only cuts your federal income tax. You still pay Social Security, Medicare, and any state taxes on your overtime. This tool gives an estimate, not tax advice.

How to use our No Tax On Overtime Calculator

Enter your tax year, filing status, pay rate, overtime hours, and income. The calculator shows your qualifying overtime deduction, your estimated federal tax savings, your tax bracket, and a full step-by-step breakdown.

Tax Year: Pick the year you are filing for. The overtime deduction starts in 2025 and ends after 2028. The 2027 and 2028 brackets are estimates.

Filing Status: Choose Single, Married Filing Jointly, or Married Filing Separately. This sets your deduction cap ($12,500 Single or $25,000 Joint) and your income limit. Married Filing Separately cannot claim this deduction.

Regular Hourly Pay Rate: Type your base pay per hour before any overtime bonus. Do not use your overtime rate here.

Overtime Hours Worked Per Week: Type the hours you work past 40 in a normal week. Check your paystub or W-2 Box 14 if you are not sure.

Number of Weeks You Work Overtime Per Year: Type how many weeks in the year you work extra hours. Use 1 to 52.

Estimated Annual Overtime Hours: This box fills in by itself. It is your weekly overtime hours times your weeks worked.

Modified Adjusted Gross Income (MAGI): Type your total yearly income for tax purposes. Your W-2 Box 1 is a good starting point. High income can shrink or erase the deduction.

Overtime Multiplier: Under Advanced Options, enter your overtime rate. Most people get 1.5x. Use a higher number for double-time. Only the extra half-time pay counts for the deduction.

401(k) / 403(b) Contributions: Enter your yearly pre-tax retirement savings. This is for your records only, since it is already taken out of your W-2 income.

HSA Contributions: Enter what you put in your health savings account through payroll. Also shown for reference only.

Traditional IRA Contributions: Enter what you paid into a traditional IRA. This lowers your MAGI and may raise your deduction.

Student Loan Interest Paid: Enter the interest you paid on student loans, up to $2,500. This also lowers your MAGI.

Dependent Care FSA Contributions: Enter your yearly dependent care FSA amount. Shown for reference only.

Number of Qualifying Dependents: Enter how many kids qualify for the Child Tax Credit. The credit is shown on its own and is not added to your overtime savings.

Click Calculate to see your results. Click Reset to start over with the default numbers.

What "No Tax on Overtime" Really Means

The One Big Beautiful Bill Act (OBBBA) created a new federal tax break for people who work overtime. It is called the qualified overtime deduction. It does not make your overtime pay tax-free. Instead, it lets you subtract part of your overtime pay from your income before your federal income tax is figured. That lowers your tax bill.

Only the Premium Part Counts

This is the rule most people get wrong. If you earn $28 an hour and your employer pays time and a half, your overtime rate is $42 an hour. Only the extra $14 counts for the deduction, the half-time "premium" above your normal rate. The first $28 is taxed like normal pay. So 100 overtime hours at $28 base pay gives you $1,400 of qualified overtime, not $4,200.

The overtime must also be the kind required by the Fair Labor Standards Act (FLSA), which usually means hours past 40 in one workweek. Extra pay from a union deal, a shift bonus, or a state rule that goes beyond federal law does not count.

How Much You Can Deduct

$12,500 is the yearly cap for single filers.
$25,000 is the yearly cap for married couples filing jointly.
Married filing separately filers cannot claim it at all.
You need a valid Social Security number to claim it.

Income Phase-Out

The deduction shrinks once you earn too much. It starts to drop when your modified adjusted gross income (MAGI) passes $150,000 for single filers or $300,000 for joint filers. You lose $100 of deduction for every $1,000 of income above that line. Single filers lose it all near $275,000. Joint filers lose it all near $550,000.

What It Does Not Do

This deduction only cuts your federal income tax. You still pay Social Security and Medicare (FICA) taxes on every dollar of overtime. Most states still tax it too, unless your state passes its own law. Your paycheck withholding may not change much either, so the benefit often shows up as a bigger refund or a smaller balance due when you file.

Good News for Non-Itemizers

You can claim this deduction even if you take the standard deduction. You do not have to itemize. Your employer reports your qualified overtime on your W-2, so check your form and your paystubs before you file.

It Has an End Date

The overtime deduction covers tax years 2025 through 2028. Unless Congress extends it, it goes away after that. Tax year 2025 is the first year you can claim it, on the return you file in early 2026.

A Quick Example

Say you make $28 an hour, work 8 overtime hours a week for 50 weeks, and have a MAGI of $78,000 as a single filer. That is 400 overtime hours. Your premium is $14 an hour, so your qualified overtime is $5,600. That is under the $12,500 cap and your income is under the phase-out line, so you deduct the full $5,600. In the 22% bracket, that saves you about $1,232 in federal income tax.

Formulas used

Annual Overtime Hours

H_{OT} = h_{week} \times w_{weeks}

Qualifying Overtime Premium per Hour

P_{hr} = R \times \min(m - 1,\ 0.5)

Annual Overtime Premium (before cap)

P_{annual} = P_{hr} \times H_{OT}

Adjusted MAGI

\text{MAGI}_{adj} = \max\left(0,\ \text{MAGI} - \left(\text{IRA} + \min(\text{Student Loan Interest},\ 2{,}500)\right)\right)

Capped Deduction

D_{cap} = \min\left(P_{annual},\ C\right), \quad C = \begin{cases} \$12{,}500 & \text{Single} \\ \$25{,}000 & \text{MFJ} \end{cases}

Final Qualifying Deduction after MAGI Phase-Out

D_{final} = \begin{cases} D_{cap} & \text{MAGI}_{adj} \le T \\ \max\!\left(0,\ D_{cap} - 0.10\,(\text{MAGI}_{adj} - T)\right) & T < \text{MAGI}_{adj} < T + 10C \\ 0 & \text{MAGI}_{adj} \ge T + 10C \end{cases}

Estimated Federal Tax Savings and Bracket-Exact Difference

S = D_{final} \times r_{marg}, \qquad \Delta = \text{Tax}(I) - \text{Tax}(I - D_{final}), \quad I = \max(0,\ \text{MAGI}_{adj} - \text{Std})

Estimated Child Tax Credit after Phase-Out

\text{CTC} = \max\!\left(0,\ n \times c - 50 \times \left\lceil \frac{\max(0,\ \text{MAGI}_{adj} - T_{CTC})}{1{,}000} \right\rceil \right)

Frequently asked questions

Is overtime pay really tax free now?

No. Overtime is still taxed. The new law gives you a deduction, not a tax exemption. You subtract part of your overtime pay from your income, which lowers your federal income tax. You still owe Social Security tax, Medicare tax, and most likely state tax on all of your overtime pay.

How do I figure out the premium part of my overtime pay?

Take your base hourly rate and cut it in half. That half is your premium per overtime hour. Then multiply it by your overtime hours for the year.

Example: $30 an hour base pay means a $15 premium. Work 300 overtime hours and your qualified overtime is $4,500.

Does double-time pay give a bigger overtime deduction?

No. The deduction only covers the half-time premium the Fair Labor Standards Act requires. At double-time you get an extra full hour of pay, but only 0.5x of it counts as qualified overtime. The rest is taxed like normal wages.

Do I have to itemize to claim the overtime deduction?

No. You can take the standard deduction and still claim the overtime deduction. It sits on top of your standard deduction, so nearly every overtime worker can use it.

Will my paycheck get bigger because of the overtime deduction?

Probably not by much. Most payroll systems keep withholding federal tax on overtime the same way. The benefit usually shows up when you file your return, as a larger refund or a smaller bill. You can adjust your Form W-4 if you want more money in each check instead.

Where is qualified overtime shown on my W-2?

Employers report qualified overtime in Box 14 of your W-2 or on a separate statement. For 2025 the IRS allows some flexibility, so if your W-2 does not list it, add up the premium amounts on your paystubs and ask your payroll department to confirm.

At what income do you lose the overtime deduction completely?

Single filers lose all of it near $275,000 of MAGI. Married couples filing jointly lose all of it near $550,000. The drop starts at $150,000 single and $300,000 joint, falling $100 for every $1,000 of income above the line.

Why can't married filing separately claim the overtime deduction?

The law simply leaves that filing status out. If you file separately from your spouse, you get no overtime deduction at all. Couples who both work overtime usually do better filing jointly, since they share a $25,000 cap.

Can both spouses claim overtime pay on a joint return?

Yes, but you share one cap. A married couple filing jointly can deduct up to $25,000 of combined qualified overtime premium. If one spouse has $18,000 and the other has $9,000, you deduct $25,000, not $27,000.

What years does the no tax on overtime deduction cover?

Tax years 2025 through 2028. The first return you can claim it on is your 2025 return, filed in early 2026. It ends after 2028 unless Congress votes to extend it.

Does my state still tax my overtime pay?

Yes, in most cases. This is a federal deduction only. Your state follows its own rules unless it passes a matching law. States with no income tax, like Texas and Florida, never taxed it anyway.

Do salaried workers qualify for the overtime deduction?

Only if you are non-exempt and your employer legally owes you FLSA overtime. Most salaried exempt workers get no overtime pay, so they have nothing to deduct. Check your job classification on your paystub or ask HR.

Do bonuses, holiday pay, or shift differentials count as overtime?

No. Only the FLSA-required premium for hours worked past 40 in a workweek counts. Holiday pay, weekend bonuses, on-call pay, shift differentials, and extra pay from a union contract or state law beyond federal rules do not qualify.

How much can a typical overtime worker save?

Multiply your qualified overtime premium by your tax bracket. Someone with $5,000 of premium in the 22% bracket saves about $1,100. Someone with $2,000 of premium in the 12% bracket saves about $240. The higher your bracket and your overtime hours, the bigger the savings.

Do I need a Social Security number to claim it?

Yes. You must have a valid Social Security number to claim the overtime deduction. On a joint return, the SSN information has to be right for the return as filed, so double-check both spouses' numbers.

What is MAGI and why does it matter for overtime?

MAGI stands for modified adjusted gross income. It is your income after certain adjustments, and it decides whether your overtime deduction phases out. Start with W-2 Box 1 wages, add other income, then subtract things like deductible IRA contributions and student loan interest.

Does the overtime deduction lower my Social Security and Medicare taxes?

No. FICA taxes of 7.65% still come out of every overtime dollar. The deduction only applies to federal income tax. Your future Social Security benefits are not reduced either, since your wage record stays the same.

Can I claim both the overtime deduction and the tip deduction?

Yes, if you earn both. OBBBA created separate deductions for qualified overtime and qualified tips, each with its own cap. A worker with tipped wages and overtime hours can claim both on the same return.

Filing Details

Overtime Pay

Income

Full Deduction Eligible

Income Phase-Out Position

Calculation Breakdown

Without Deduction vs. With Deduction

Child Tax Credit — Shown Separately

Step-by-Step Solution

Rate this calculator