No Tax on Overtime Calculator
Estimate the 2025-2028 no tax on overtime deduction: how much of your overtime premium is deductible, how the income phase-out applies, and your tax saved.
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This calculator estimates the "no tax on overtime" federal deduction created by the One Big Beautiful Bill Act for tax years 2025–2028. It splits your overtime pay into its base and premium portions, applies the $12,500 ($25,000 joint) cap and the income phase-out, and then runs your full tax return both with and without the deduction to show the actual federal tax dollars it saves.
Federal Tax Saved
$420
Deduction Claimed
$3,500
Phased Out
$0
Your Overtime & Income
Why only "half"?
Time-and-a-half overtime pay is 1.5x your regular rate. The first 1x is your normal wage rate applied to extra hours, fully taxable, same as always. Only the extra 0.5x "premium" that the FLSA requires is what Section 225 lets you deduct.
How Your Overtime Pay Splits
Base Portion (1x)
$7,000
Taxed as ordinary wages
Premium Portion (0.5x)
$3,500
Eligible for the deduction
| Total overtime pay (1.5x) | $10,500 |
| Deduction before phase-out (capped at $12,500) | $3,500 |
| Amount removed by the income phase-out | −$0 |
| Deduction you can claim | $3,500 |
| Taxable income without the deduction | $39,400 |
| Taxable income with the deduction | $35,900 |
| Federal tax without the deduction | $4,480 |
| Federal tax with the deduction | $4,060 |
| Federal tax saved | $420 |
How the Overtime Deduction Works
The One Big Beautiful Bill Act (P.L. 119-21) created a temporary federal income tax deduction for tax years 2025 through 2028. It applies to "qualified overtime compensation": the FLSA-required premium portion of time-and-a-half overtime pay. It does not exempt overtime from payroll withholding during the year; it is claimed as a deduction when you file, on Schedule 1-A. See the IRS Q&A on the qualified overtime compensation deduction.
The Formula
($25,000 cap and $300,000 MAGI threshold if married filing jointly)
A Worked Example
Take this calculator's defaults: a single filer earning $28/hour who works 250 overtime hours in 2026, plus $45,000 in other income. Total overtime pay is 250 × $28 × 1.5 = $10,500, which splits into a $7,000 base portion (250 × $28 × 1) and a $3,500 premium portion (250 × $28 × 0.5). Total income is $45,000 + $10,500 = $55,500, well under the $150,000 phase-out. The full $3,500 premium is deductible (and under the $12,500 cap too). After the $16,100 single standard deduction, taxable income falls from $39,400 to $35,900. Federal tax drops from $4,480 to $4,060, a $420 tax saving that lands in the 12% bracket in this example.
Who Qualifies
- You're an FLSA overtime-eligible employee. This means hourly or non-exempt salaried, receiving true time-and-a-half overtime under the Fair Labor Standards Act.
- You have a valid, work-eligible Social Security number.
- If married, you file a joint return. Married filing separately disqualifies the deduction entirely.
- Your MAGI is under roughly $275,000 (single) or $550,000 (joint). This is the point where the phase-out eliminates the maximum deduction entirely, though the exact cutoff depends on how much overtime you earned.
What This Doesn't Cover
- Social Security and Medicare (FICA) tax still apply to 100% of your overtime pay. This is an income tax deduction only.
- Most states tax overtime pay under their own rules; this calculator is federal-only.
- Independent contractors and salaried-exempt employees generally don't generate "qualified overtime compensation" at all.
- This tool estimates MAGI as your total income with no adjustments. Your actual MAGI may include or exclude items this simplification doesn't model.
This is an estimate for planning, not a substitute for professional advice. For your specific situation, check IRS guidance on OBBBA deductions or talk to a CPA or enrolled agent.
Common Questions
?Is all of my overtime pay tax-free?
No. Only the "premium" half of time-and-a-half overtime (the extra 0.5x that the FLSA requires on top of your regular rate) is eligible for the deduction, and only up to $12,500 a year ($25,000 if married filing jointly). The base 1x portion of overtime hours is taxed exactly like regular wages, and the deduction only reduces federal income tax. It does not apply to Social Security, Medicare, or (in most states) state income tax.
?Do 1099 contractors qualify?
No. The deduction is for FLSA overtime-eligible employees, and it is tied to overtime pay reported by an employer on Form W-2 (or, per IRS guidance, certain 1099-NEC/1099-MISC reporting for specific arrangements). General self-employment or contractor income does not generate "qualified overtime compensation."
?What if I am married? Do we both get $12,500?
The cap for a married couple filing jointly is a combined $25,000, not $12,500 per spouse. Married taxpayers must file jointly to claim the deduction at all; filing separately disqualifies both spouses.
?What income counts toward the $150,000 phase-out?
It's your modified adjusted gross income (MAGI). For most W-2 employees without foreign income or certain other adjustments, MAGI is very close to AGI. This calculator uses your total income (other income plus overtime pay) as a simple stand-in for MAGI; your actual MAGI may differ slightly.
?Does this deduction last forever?
No. It applies only to tax years 2025 through 2028 under the One Big Beautiful Bill Act. Unless Congress extends it, qualified overtime compensation goes back to being fully taxable starting with the 2029 tax year.
About this calculator. Results are estimates for education and planning, based on the inputs you enter and the published formula described above. Everything runs in your browser; nothing you type is sent to us or stored. It is not financial, tax, legal or medical advice. Read the disclaimer and our methodology.
Spotted an error or an out-of-date figure? Tell us and we will correct it and note the change in the update log.