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No Tax on Overtime Calculator

How much of your overtime pay you can deduct under the "no tax on overtime" rule for 2025 to 2028: the premium part of time-and-a-half, after the income phase-out.

You can deduct $4,200 of overtime premium pay, which saves about $854 of federal income tax at 2026 rates.

Your deduction
$4,200
Federal income tax saved
$854
Most you could deduct
$12,500
Lost to the income phase-out
$0

The overtime deduction for a $30-an-hour worker, by overtime hours (single, $75,000 income)

Overtime hoursOvertime payDeductible premiumTax saved
100$4,500$1,500$330
250$11,250$3,750$825
500$22,500$7,500$1,650
800$36,000$12,000$2,290
1000$45,000$12,500$2,350

How this calculator works

Only the premium is deductible: the extra half in time-and-a-half, so $15 of a $45 overtime hour at a $30 regular rate (26 U.S.C. 225). The deduction is capped at $12,500 ($25,000 joint), less $100 for each full $1,000 of modified AGI above $150,000 ($300,000 joint).

Deductions lower federal taxable income whether you itemize or take the standard deduction. They don't lower Social Security or Medicare tax, and states decide for themselves whether to follow them.

The tax saved is estimated at 2026 federal rates with the standard deduction, treating your modified AGI as your income.

What it assumes

  • Overtime must be required by the federal Fair Labor Standards Act (hours over 40 a week for non-exempt workers). Overtime paid only under a state law or a contract doesn't qualify.
  • You need a valid Social Security number, and married couples must file jointly.

Questions people ask

How does no tax on overtime work?

From 2025 through 2028, the premium part of qualified overtime pay (the "half" of time-and-a-half) is deductible from federal taxable income, up to $12,500 a year or $25,000 for joint filers.

Is all my overtime pay tax-free?

No. The regular-rate part of each overtime hour is still taxed; only the premium is deducted. Social Security and Medicare still apply to all of it.

How much will I save?

At $30 an hour with 300 overtime hours, the premium is $4,500; a single filer with $75,000 of income saves about $990 of federal income tax.

Is there an income limit?

The cap shrinks by $100 for every $1,000 of modified AGI over $150,000 ($300,000 joint).

Where do I find my qualified overtime?

Employers report it on Form W-2 or a separate statement. For 2025, the IRS lets you work it out from pay stubs if your employer didn't report it separately.

Related calculators

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Sources

Updated by the RateHerald team. The maths is tested against worked examples; report a problem.

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