No Tax on Overtime Calculator
Created by: Emma Collins
Last updated:
Estimate your no tax on overtime deduction and federal tax savings for 2025 or 2026, including the $12,500 cap and income phase-out.
No Tax on Overtime Calculator
FinanceEstimate your qualified overtime deduction and how much federal income tax it saves.
Hours over 40 in a workweek
Pay not counting overtime
Spouse’s income on a joint return, interest, etc.
How the no tax on overtime deduction works
The deduction covers the premium part of overtime: the extra half you earn on top of your regular rate. It reduces federal taxable income, so the saving equals the deduction times your tax bracket. It is claimed on Schedule 1-A for tax years 2025 through 2028.
| Maximum deduction | $12,500 per return, $25,000 if married filing jointly |
| Phase-out | $100 per full $1,000 of income over $150,000 ($300,000 joint) |
| Still taxed | Social Security, Medicare, and state income tax in most states |
| Not eligible | Married filing separately; overtime beyond federal FLSA requirements |
Examples for 2026
A single worker earning $25 an hour works 5 overtime hours a week for 50 weeks. Overtime pay is $9,375, of which $3,125 is the qualifying premium. In the 12% bracket, the deduction saves $375 of federal tax.
A married couple, one earning $35 an hour with 10 overtime hours a week for 48 weeks, has $8,400 of premium pay. Their deduction is $8,400, saving $1,848 at the 22% rate.
Related calculators
Work out overtime pay itself with the overtime calculator, or see your whole tax bill with the deduction included in the federal income tax calculator.
Frequently asked questions
Is overtime tax-free now?
Not completely. For 2025 through 2028 you can deduct the extra half of time-and-a-half pay, up to $12,500 a year ($25,000 on a joint return). The regular-rate part of overtime is taxed as usual, and Social Security, Medicare and most state income taxes still apply to all of it.
Which part of my overtime counts?
Only the premium required by the Fair Labor Standards Act: half of your regular rate for each hour over 40 in a workweek. At $25 an hour, each overtime hour pays $37.50 and $12.50 of it qualifies. Overtime paid under a union contract or state law beyond what federal law requires does not qualify.
Who can claim the overtime deduction?
Employees who are not exempt from FLSA overtime rules and who have a valid Social Security number. Married couples must file jointly. You can claim it whether you take the standard deduction or itemize.
Does the deduction phase out?
Yes. It drops by $100 for every full $1,000 of modified adjusted gross income above $150,000 ($300,000 for joint returns), so the maximum deduction is gone at $275,000 single or $550,000 joint.
Will my paycheck change?
Not automatically. Employers keep withholding normally unless you file a new Form W-4. Without one, the savings arrive as a larger refund. From 2026, employers report qualified overtime in Form W-2 box 12 with code TT.