Calcvera

No Tax on Overtime Calculator

Estimate the new federal deduction for overtime pay (tax years 2025–2028). The calculator works out your qualified overtime — the extra “half” in time-and-a-half — applies the $12,500 / $25,000 cap and the income phase-out, and shows the federal income tax you’d actually save.

Updated By the Calcvera editorial team How we build & check our calculators

Your overtime & tax details

I know my

Hours over 40 in a workweek.

One-third of time-and-a-half pay is the qualified premium.

As reported by your employer.

Your total income after adjustments — Form 1040, line 11. For most people this equals MAGI.

Leave 0 to use the standard deduction.

Your results

Estimated federal tax savings

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Qualified overtime

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Deduction allowed

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Your marginal rate

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How to use this calculator

  1. Enter your overtime in whichever form you know: your hourly rate and overtime hours, the total overtime pay you received, or the qualified overtime amount your employer reported.
  2. Choose the tax year and filing status, then enter your adjusted gross income (including the overtime).
  3. See your savings. We cap the deduction, apply the phase-out, and compare your federal income tax with and without it.

What counts as qualified overtime

The deduction applies to qualified overtime compensation: overtime pay required by section 7 of the Fair Labor Standards Act that exceeds your regular rate of pay. Under the FLSA, non-exempt employees earn at least 1.5 times their regular rate for hours over 40 in a workweek. Only the extra 0.5 counts.

You earnOvertime rateQualified per OT hourNot qualified
$20/hr$30/hr$10$20 (regular pay)
$30/hr$45/hr$15$30
$40/hr, paid double time$80/hr$20 (FLSA half-time only)$60

Overtime required only by state law (for example, daily overtime after 8 hours), by a union contract, or paid voluntarily by an employer beyond FLSA requirements generally doesn’t qualify. Exempt salaried employees who aren’t owed FLSA overtime can’t claim it.

Caps and income phase-out

Filing statusMaximum deductionPhase-out begins (MAGI)
Married filing jointly$25,000$300,000
Single / head of household$12,500$150,000
Married filing separatelyNot eligible

The deduction is reduced by $100 for each $1,000 of modified AGI above the threshold.

Worked example

Dana is a single warehouse supervisor earning $30 an hour who works about 6 hours of overtime a week for 50 weeks — 300 overtime hours — with an AGI of $72,000 in 2026.

  • Overtime pay at 1.5×: 300 × $45 = $13,500. Qualified premium: 300 × $15 = $4,500.
  • MAGI is under $150,000, so the full $4,500 is deductible.
  • Taxable income drops from $55,900 to $51,400 — all in the 22% bracket — saving about $990.

What the deduction doesn’t do

  • It doesn’t reduce Social Security and Medicare taxes on your overtime.
  • It doesn’t reduce your AGI, so it won’t help with AGI-based limits such as ACA subsidy income or IRMAA.
  • It may not reduce state income tax; states decide whether to follow it.
  • It doesn’t change your paycheck withholding automatically — you may see the benefit as a larger refund unless you update Form W-4.
Also get tips or drive a new car? Combine the overtime, tips, car loan interest and senior deductions with our Schedule 1-A calculator.

How the calculator works

Qualified overtime = regular rate × 0.5 × FLSA overtime hours (or total 1.5× OT pay ÷ 3) Deduction = min(qualified, cap) − $100 × floor(max(0, MAGI − threshold) ÷ $1,000) Savings = federal tax before − federal tax after

We use 2025 or 2026 federal brackets and the standard deduction (plus the extra amount for filers 65+), or your itemized deductions if larger. Credits, other income and state taxes aren’t included. This is an estimate, not tax advice.

Frequently asked questions

Is all my overtime pay tax-free now?
No. Only the premium part of overtime required by the Fair Labor Standards Act is deductible — the extra half of your regular rate in “time-and-a-half”. If you earn $30 an hour and $45 for overtime hours, $15 of each overtime hour counts. And it’s a deduction from taxable income, not an exclusion, capped at $12,500 ($25,000 for joint filers).
Does double time count?
Only up to the FLSA-required premium. The FLSA requires time-and-a-half for hours over 40 in a workweek, so only the half-time premium on those hours qualifies. Extra premiums paid under state law (such as daily overtime) or a union contract generally don’t count.
Which years does the overtime deduction apply to?
Tax years 2025 through 2028. Unless Congress extends it, it ends after 2028.
Do I still pay Social Security and Medicare tax on overtime?
Yes. The deduction only reduces federal income tax. Payroll taxes (FICA) and most state income taxes still apply to all of your overtime pay.
Who is eligible?
Workers who are owed overtime under the FLSA (non-exempt employees) and have a valid Social Security number. If you’re married, you must file jointly to claim it. The deduction phases out at higher incomes.
Where do I find my qualified overtime amount?
Employers must report qualified overtime to employees. For 2025, the IRS let employers use reasonable methods and let employees rely on pay stubs or other statements. From 2026, look for the amount reported on your Form W-2 or a separate statement from your employer.

Sources

Key terms

About this calculator. Written and maintained by the Calcvera editorial team and last reviewed on September 25, 2026. Rules and figures are checked against the official sources listed above. Results are estimates for education — not financial, tax or legal advice. Found an error? Tell us and we'll fix it. Read our editorial policy.