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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

Estimated deductible amount
$0
Premium portion of overtime (0.5 × rate × hours)$0
After statutory cap$0
Phase-out reduction$0
Deduction you can claim$0
Estimated federal income tax saved$0

"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

  1. 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.
  2. Cap = $12,500 (single / HoH) or $25,000 (married filing jointly). The deduction can't exceed this.
  3. 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.
  4. 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