No Tax on Overtime Calculator
“No tax on overtime” is real but narrower than it sounds. For 2025–2028 you can deduct only the premium — the extra half of time-and-a-half — from your federal income tax, up to $12,500 (single) or $25,000 (joint). Social Security, Medicare, and usually state income tax still apply. This calculator turns your overtime into the qualified premium, applies the cap and income phase-out, and estimates the actual tax you'll save.
Deduct the overtime premium (½ of time-and-a-half), not your whole overtime check. Shortcut: total time-and-a-half overtime ÷ 3. Capped at $12,500 single / $25,000 joint, phasing out above $150k / $300k income. It cuts federal income tax only — FICA and most state taxes remain.
- Max deduction (single)$12,500
- Max deduction (joint)$25,000
- $9,000 OT pay → premium$3,000
- Applies to tax years2025–2028
One Big Beautiful Bill Act §70202. Source: IRS — No Tax on Overtime deduction.
Roughly your annual gross income — sets your tax bracket and the phase-out.
The full time-and-a-half overtime you were paid; we take the deductible ⅓.
What this deduction does not do: Social Security & Medicare (7.65%) and usually state income tax still apply to your full overtime — only federal income tax is reduced. Report the deduction on Schedule 1-A. Need the pay math first? Overtime pay calculator →
How to calculate your qualified overtime deduction
- Add up your time-and-a-half overtime pay for the year (pay stubs or W-2). Only FLSA-required overtime counts.
- Take the premium only. The deduction is the extra half of time-and-a-half, not the whole check. Divide total overtime pay by three, or multiply overtime hours by half your regular rate. ($9,000 ÷ 3 = $3,000.)
- Apply the cap: $12,500 single, $25,000 married filing jointly (combined, not per spouse).
- Apply the phase-out: above $150,000 (single) / $300,000 (joint) of income, subtract $100 for every $1,000 over. It's gone entirely at $275,000 / $550,000.
- Estimate the savings: multiply what's left by your marginal federal tax rate. In the 22% bracket, a $3,000 deduction saves about $660.
Deduction limits and phase-out
| Filing status | Max deduction | Phase-out starts (MAGI) | Fully gone at |
|---|---|---|---|
| Single | $12,500 | $150,000 | $275,000 |
| Head of household | $12,500 | $150,000 | $275,000 |
| Married filing jointly | $25,000 | $300,000 | $550,000 |
Phase-out rate: the deduction drops $100 for each $1,000 (or part) of income above the threshold. Married filers must file jointly to claim it; married filing separately does not qualify.
Worked examples
1) Warehouse worker, single. $22/hr, about 6 overtime hours a week (300 hrs/yr). Premium = 300 × $11 = $3,000. At a $55,000 income (12% bracket), the deduction saves roughly $360 in federal income tax. FICA and state tax on that overtime don't change.
2) Nurse, married filing jointly. $45/hr, 400 overtime hours. Premium = 400 × $22.50 = $9,000, well under the $25,000 joint cap. In the 22% bracket that's about $1,980 in federal savings.
3) High earner in the phase-out, single. Premium hits the $12,500 cap, but income is $200,000 — $50,000 over the $150,000 threshold, so the deduction drops by $5,000 to $7,500. At a 24% marginal rate, savings are about $1,800.
How to claim it (and find your qualified overtime)
The deduction is above the standard deduction — you don't have to itemize — and is reported on new Schedule 1-A with your Form 1040. You need a valid Social Security number, and married taxpayers must file jointly.
Employers report qualified overtime in Box 14 of your W-2 (or a separate statement). For 2025, the IRS is not requiring employers to break it out separately, so if your W-2 doesn't show it, use the ÷ 3 shortcut on your total time-and-a-half overtime. Keep your pay stubs.
Frequently asked questions
Is overtime tax-free now?
No. Only the overtime premium — the extra half of time-and-a-half — can be deducted from federal income tax for 2025–2028, up to $12,500 (single) or $25,000 (joint). Social Security, Medicare and usually state income tax still apply to the full amount, so “no tax on overtime” is a bit of a misnomer.
How much of my overtime can I deduct?
Only the premium (half of time-and-a-half), capped at $12,500 for single filers and $25,000 for married filing jointly. The deduction phases out by $100 for every $1,000 of income over $150,000 (single) or $300,000 (joint), disappearing at $275,000 / $550,000.
How do I calculate my qualified overtime?
Divide your total time-and-a-half overtime pay by three, or multiply your overtime hours by half your regular hourly rate. Example: $9,000 of overtime pay ÷ 3 = $3,000 of deductible premium.
Does No Tax on Overtime remove state income tax?
No. It only reduces federal income tax. Most states still tax overtime in full unless the state passes its own conforming law, and Social Security and Medicare (7.65%) are still withheld on the whole amount.
What years does the No Tax on Overtime deduction apply to?
Tax years 2025 through 2028. It's a temporary provision of the 2025 One Big Beautiful Bill Act and expires after 2028 unless Congress extends it.
Do I have to itemize to claim it?
No. The deduction is available whether you take the standard deduction or itemize. You report it on Schedule 1-A, you need a valid Social Security number, and if married you must file jointly.
Sources & methodology
Sources: IRS — No Tax on Overtime deduction · IRS — OBBBA deductions for workers · Tax Foundation — 2025 brackets.
Estimates use 2025 federal tax brackets and the 2025 standard deduction ($15,750 single / $31,500 joint / $23,625 HoH) to approximate your marginal rate from the income you enter; your actual rate depends on your full return. This is general information, not tax advice — confirm on Schedule 1-A or with a tax professional.