Free Tax Tool

No Tax on Overtime Calculator

Estimate your federal overtime deduction for 2026, after the cap and income phase-out, and see how much income tax it saves you.

$

All overtime pay for the year, at the full overtime rate

Only the half-time premium the FLSA requires qualifies, even for double time

$

Estimate of your total income for the year, including the overtime

Estimated 2026 overtime deduction

Estimated federal income tax saved

$660.00

Qualified overtime premium
$3,000.00
After the $12,500.00 cap
$3,000.00
Income phase-out reduction
-$0.00
Overtime deduction (Schedule 1-A)
$3,000.00
Your federal tax bracket
22%

Estimate only. The deduction is reduced by $100 for each full $1,000 of MAGI over $150,000.00. It lowers federal income tax only, not Social Security or Medicare tax, and is available for tax years 2025 through 2028 whether or not you itemize. Requires a valid Social Security number, and FLSA-exempt employees do not qualify.

How the no tax on overtime deduction is calculated

  1. Find the qualified premium. Divide total overtime pay by the multiplier to get your regular rate pay, then take half of that. Only this FLSA premium counts.
  2. Apply the cap of $12,500 ($25,000 for married filing jointly).
  3. Subtract $100 for each full $1,000 of modified AGI over $150,000 ($300,000 for joint filers).
  4. Your savings are the federal income tax on your taxable income minus the tax after the deduction.

Example: a single filer earns $9,000 in time-and-a-half overtime and has $70,000 of modified AGI. The regular rate portion is $9,000 / 1.5 = $6,000, so the qualified premium is $3,000. That is under the cap and income is under $150,000, so the full $3,000 is deductible. After the $16,100 standard deduction, taxable income is $53,900, which is in the 22% bracket, so the deduction saves about $660 in federal income tax.

The deduction is claimed on Schedule 1-A whether you take the standard deduction or itemize. It does not reduce Social Security or Medicare tax.

Frequently asked questions

Is overtime tax-free now?

Not entirely. For tax years 2025 through 2028, you can deduct the qualified overtime premium on Schedule 1-A, up to $12,500 a year ($25,000 if married filing jointly). Your overtime is still taxed when it is paid, and the deduction lowers your federal income tax when you file your return.

Is all of my overtime pay deductible?

No. Only the premium portion required by the Fair Labor Standards Act qualifies, which is the extra half of your regular rate in time-and-a-half. If you earn $20 an hour and $30 for overtime, only $10 of each overtime hour counts. For double time, only the half-time premium the FLSA requires counts, not the full extra amount.

Do I still pay Social Security and Medicare on overtime?

Yes. The overtime deduction reduces federal income tax only. Social Security and Medicare (FICA) taxes are still withheld from all of your overtime pay.

Does no tax on overtime apply to state taxes?

Not automatically. The deduction is federal. Each state decides whether to follow it, and many states do not, so your overtime may still be fully taxed on your state return. Check with your state tax agency.

Will my paycheck withholding change?

Not by itself. Employers still withhold on overtime the usual way, so most people see the benefit as a larger refund. If you want more take-home pay during the year, you can account for the expected deduction on a new Form W-4.

Do salaried or exempt employees qualify?

Only overtime required under the FLSA qualifies. If you are classified as FLSA-exempt (many salaried professional, executive, and administrative roles), overtime your employer chooses to pay you does not qualify, even though it is paid as overtime.

How do I find my qualified overtime amount?

Starting with 2026, employers must report qualified overtime compensation separately on your Form W-2. For 2025, employers could report it in box 14 or on a separate statement, and you may need to work it out from your pay stubs. This calculator estimates it from your total overtime pay if you do not have the exact figure.

When does the overtime deduction end?

The deduction applies to tax years 2025 through 2028. Unless Congress extends it, overtime earned in 2029 and later will not qualify. You also need a valid Social Security number, and married couples must file jointly to claim it.

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