No Tax on Overtime Calculator
Estimate the 2025–2028 overtime deduction: the FLSA half-time premium, the $12,500 / $25,000 cap, the MAGI phase-out and your federal tax saved.
No Tax on Overtime Calculator: with the default inputs, estimated federal income tax saved is $1,320.00.
Your straight-time rate. The deductible part of overtime is half of this for every FLSA overtime hour.
Hours over 40 in a workweek that your employer must pay at time-and-a-half under the FLSA.
Regular pay plus any other income in AGI, excluding overtime. $30 × 2,080 hours = $62,400.
Federal income tax without the deduction minus tax with it, on the standard deduction.
- Overtime deduction allowed
- $6,000
- Qualified overtime premium
The half-time portion of FLSA overtime pay — the only part that is deductible.
- $6,000
- Total overtime pay
- $18,000
- Modified AGI
Other income plus all overtime pay. The deduction comes after AGI, so it does not lower this.
- $80,400
- Phase-out reduction
- $0
- Marginal federal bracket
- 22%
- Social Security + Medicare still owed on overtime
The deduction is income tax only; payroll tax is still withheld on every overtime dollar.
- $1,377
Assumptions
- Every overtime hour entered is FLSA-required overtime (over 40 hours in a workweek for a non-exempt employee); qualified overtime is 0.5 × the regular rate per hour, even when you are paid double time.
- Cap $12,500 ($25,000 MFJ), reduced by $100 per whole $1,000 of MAGI over $150,000 ($300,000 MFJ), per Schedule 1-A lines 15–21. Married filing separately cannot claim it. Tax years 2025–2028 only.
- MAGI is taken as your other income plus all overtime pay (no foreign-income add-backs). The deduction is below the line, so it does not reduce MAGI.
- Tax saved uses the year's federal brackets and standard deduction (from the income tax calculator's IRS tables); no itemizing, credits, other Schedule 1-A deductions or state tax.
- Payroll tax on overtime treats your other income as wages, for the Social Security wage base and the Additional Medicare threshold.
| OT hours / week | Overtime pay | Qualified premium | Deduction | Federal tax saved |
|---|---|---|---|---|
| 2 | $4,500 | $1,500 | $1,500 | $220 |
| 4 | $9,000 | $3,000 | $3,000 | $660 |
| 6 | $13,500 | $4,500 | $4,500 | $990 |
| 8 | $18,000 | $6,000 | $6,000 | $1,320 |
| 10 | $22,500 | $7,500 | $7,500 | $1,650 |
| 12 | $27,000 | $9,000 | $9,000 | $1,980 |
| 15 | $33,750 | $11,250 | $11,250 | $2,475 |
| 20 | $45,000 | $15,000 | $12,500 | $2,750 |
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How this is worked out
The formula
Qualified overtime = regular rate × 0.5 × FLSA overtime hours (the "half" of time-and-a-half) Capped = min(qualified overtime, $12,500) ($25,000 married filing jointly) Reduction = $100 × floor((MAGI − $150,000) ÷ $1,000) ($300,000 MFJ; zero if MAGI is below) Deduction = max(0, capped − reduction) Tax saved = tax(MAGI − standard deduction) − tax(MAGI − standard deduction − deduction) MAGI = AGI including all overtime pay (Schedule 1-A Part I)
Open How it’s calculated above to see this worked through with your own numbers.
What you enter
- Tax year
- Choose one of 2 options.2026 (return filed in 2027) · 2025 (return filed in 2026)
- Filing status
- Choose one of 4 options.Single · Married filing jointly · Head of household · Married filing separately (not eligible)
- Regular hourly rate
- Your straight-time rate. The deductible part of overtime is half of this for every FLSA overtime hour.in dollars · 0 or more · defaults to 30
- Overtime hours per week
- Hours over 40 in a workweek that your employer must pay at time-and-a-half under the FLSA.from 0 to 100 · defaults to 8
- Weeks with overtime
- A number.from 0 to 53 · whole numbers only · defaults to 50
- All other income for the year
- Regular pay plus any other income in AGI, excluding overtime. $30 × 2,080 hours = $62,400.in dollars · 0 or more · defaults to 62400
- Overtime is paid at(under More options)
- Only the FLSA-required half-time premium qualifies, so double time adds pay but not deduction.Time-and-a-half (1.5×) · Double time (2×)
What you get back
- Estimated federal income tax savedmain answer
- Federal income tax without the deduction minus tax with it, on the standard deduction.
- Overtime deduction allowed
- Qualified overtime premium
- The half-time portion of FLSA overtime pay — the only part that is deductible.
- Total overtime pay
- Modified AGI
- Other income plus all overtime pay. The deduction comes after AGI, so it does not lower this.
- Phase-out reduction
- Marginal federal bracket
- Social Security + Medicare still owed on overtime
- The deduction is income tax only; payroll tax is still withheld on every overtime dollar.
What this assumes
- Every overtime hour entered is FLSA-required overtime (over 40 hours in a workweek for a non-exempt employee); qualified overtime is 0.5 × the regular rate per hour, even when you are paid double time.
- Cap $12,500 ($25,000 MFJ), reduced by $100 per whole $1,000 of MAGI over $150,000 ($300,000 MFJ), per Schedule 1-A lines 15–21. Married filing separately cannot claim it. Tax years 2025–2028 only.
- MAGI is taken as your other income plus all overtime pay (no foreign-income add-backs). The deduction is below the line, so it does not reduce MAGI.
- Tax saved uses the year's federal brackets and standard deduction (from the income tax calculator's IRS tables); no itemizing, credits, other Schedule 1-A deductions or state tax.
- Payroll tax on overtime treats your other income as wages, for the Social Security wage base and the Additional Medicare threshold.
About this calculator
The One Big Beautiful Bill Act, signed July 4, 2025, created a federal deduction for qualified overtime compensation for tax years 2025 through 2028. "No tax on overtime" is a generous headline for a narrower rule: you can deduct only the premium part of overtime the Fair Labor Standards Act requires — the extra half in time-and-a-half — not the whole overtime check. This calculator works out that premium, applies the cap and income phase-out exactly as IRS Schedule 1-A does, and shows what it is actually worth in federal income tax.
How to use it
Enter your regular hourly rate, how many overtime hours you typically work in a week, how many weeks a year you work them, and your other income (regular pay plus anything else that lands in AGI). Pick your filing status. Under More options you can say you're paid double time — the deduction doesn't grow, because the law covers only the FLSA-required half-time premium. Use Solve for to ask, say, how many overtime hours it takes to hit the cap.
How to read the results
- Qualified overtime premium is 0.5 × your rate × your overtime hours. At $30/hour, each overtime hour pays $45, of which $15 is deductible.
- Deduction allowed is that premium capped at $12,500 ($25,000 on a joint return), then reduced by $100 for every full $1,000 your modified AGI exceeds $150,000 ($300,000 joint). A single filer with the full $12,500 loses it entirely at $275,000.
- Federal tax saved is the difference in income tax with and without the deduction, using the standard deduction and the year's brackets. It's roughly the deduction times your marginal rate — about $1,300 for someone in the 22% bracket deducting $6,000.
- Social Security + Medicare still owed is the payroll tax that keeps coming out of every overtime dollar. The deduction doesn't touch it.
The chart traces the deduction against income so you can see where the phase-out starts biting; the table shows what more or fewer overtime hours would be worth.
What it doesn't do
- It isn't a withholding change. Your employer still withholds income tax on overtime as before (unless you adjust your W-4); the saving shows up when you file. For 2025 many employers didn't separately report qualified overtime, so you may have to work it out from pay stubs; from 2026 it's reported separately on Form W-2.
- It's federal only. Most states don't follow it, so state income tax on overtime is unchanged unless your state adopted its own version.
- Not all overtime qualifies. Overtime paid because of state daily-overtime laws, a union contract or company policy — beyond what the FLSA requires — isn't qualified, and neither is pay for FLSA-exempt employees. Married couples must file jointly, and you need a valid Social Security number.
- It assumes the standard deduction and no credits; a large child tax credit can mean the deduction saves less than shown.
Frequently asked questions
▸Is all of my overtime tax-free now?
No. Only the FLSA-required premium — the half in time-and-a-half — is deductible, up to $12,500 a year ($25,000 joint). If you earn $45 an hour for overtime on a $30 base rate, $15 of each hour qualifies, and the deduction is from federal income tax only.
▸Does no tax on overtime reduce Social Security and Medicare?
No. Social Security (6.2%) and Medicare (1.45%) are still withheld on all overtime pay. The deduction lowers taxable income on your federal return, not your payroll taxes.
▸How does the phase-out work?
Schedule 1-A takes the smaller of your qualified overtime or the cap, then subtracts $100 for each full $1,000 your modified AGI exceeds $150,000 ($300,000 married filing jointly). The cap is fully gone at $275,000 for a single filer claiming $12,500.
▸Do I need to itemize to get the overtime deduction?
No. It's available whether you take the standard deduction or itemize, and it's claimed on Schedule 1-A of Form 1040.
▸Which years does it apply to?
Tax years 2025 through 2028. Unless Congress extends it, overtime earned in 2029 is fully taxable again.
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