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No Tax on Overtime Calculator (2025)
Estimate your OBBBA "no tax on overtime" deduction. Only the premium half of time-and-a-half counts — this tool models that, plus the caps and income phase-out.
Updated for tax year 2025 · OBBBA deduction available 2025–2028
"No tax on overtime" is a deduction, not an exemption. FICA (Social Security + Medicare) and state income tax still apply to your overtime. This is an estimate for educational use — not tax advice.
Worked example
Per IRS guidance: a worker earns $15,000 in time-and-a-half pay over the year. Time-and-a-half = 1.5 × regular pay, so the regular-pay component is $10,000 and the premium portion is $5,000 (the extra "half"). Only that $5,000 is the deductible overtime amount — assuming income is under the phase-out threshold and within the cap. At a 12% marginal rate, that saves about $600 in federal income tax.
How the calculation works
- Premium portion = 0.5 × regular hourly rate × FLSA overtime hours. This is the "half" in time-and-a-half — the only part the law lets you deduct.
- Cap = $12,500 (single / HoH) or $25,000 (married filing jointly). The deduction can't exceed this.
- MAGI phase-out begins at $150,000 (single) / $300,000 (joint). The deduction is reduced by $100 for every $1,000 (or fraction) of modified AGI above the threshold.
- Tax saved ≈ final deduction × your federal marginal rate. (A deduction lowers taxable income, not your tax bill dollar-for-dollar.)
Only FLSA-required overtime (hours over 40 in a workweek at time-and-a-half) qualifies. Daily or contractual overtime beyond FLSA may not. The deduction is above-the-line, so you don't need to itemize.
FAQ
Is all my overtime pay tax-free?
No — only the premium "half" of time-and-a-half, capped and phased out by income. Your base overtime wages remain taxable.
Does this remove FICA or state tax?
No. It's a federal income-tax deduction only. Social Security, Medicare, and most state taxes still apply.
Do I have to itemize to claim it?
No. It's an above-the-line deduction available whether or not you itemize.
What years does it apply to?
Tax years 2025 through 2028 under the OBBBA, unless extended.
→ See all four 2025 deductions combined in the OBBBA Savings Suite
People also ask
How much money will I get with no tax on overtime?
Your savings equal the deductible overtime premium multiplied by your marginal federal income tax rate, not the full overtime you earned. For example, if you worked 200 overtime hours at a $20 regular rate, the premium half is $10 × 200 = $2,000 of deduction, which at a 12% marginal rate saves about $240 in federal income tax. The deduction is capped and phases out at higher incomes, so the calculator applies those limits to your actual numbers.
Do you get a bigger tax refund if you work overtime?
Not automatically. Overtime is withheld like any other wages during the year, so working more hours means more tax withheld as well as more income. The OBBBA deduction is claimed when you file, which lowers your taxable income and can turn some of that withholding into a larger refund, but only for the premium portion of qualifying overtime and only within the annual cap.
How do I figure out my overtime pay for my taxes?
Separate your overtime into the regular-rate portion and the premium portion, because only the premium half of time-and-a-half is deductible. If your regular rate is $20 and overtime pays $30, the premium is $10 per overtime hour; multiply that by your overtime hours for the year. Your employer is expected to report qualified overtime on your W-2 or a separate statement, so use that figure when available and pay stubs as a backup.
Who qualifies for no tax on overtime?
Employees who receive overtime required under the Fair Labor Standards Act qualify, meaning the time-and-a-half premium for hours over 40 in a workweek. The deduction is available whether or not you itemize, but it is subject to an annual cap, phases out above a modified adjusted gross income threshold, and requires a Social Security number and, if married, a joint return. Overtime paid only because of a contract or a state rule beyond the FLSA minimum does not count; this is general information, not tax advice.
How much is overtime for $22.50 an hour weekly?
At $22.50 an hour, time-and-a-half is $22.50 × 1.5 = $33.75 per overtime hour. Ten overtime hours in a week would pay 10 × $33.75 = $337.50, of which the premium portion is 10 × $11.25 = $112.50. That $112.50 is the only part that counts toward the no-tax-on-overtime deduction; the base $22.50 per hour remains fully taxable.