No Tax on Overtime Calculator
See how much of your overtime counts toward the federal deduction on your yearly return.
No tax on overtime calculator, 2026
Overtime deduction, 2026 return (estimate)
$3,250.00
a year, if every biweekly check had this overtime
- Overtime pay per biweekly check
- $375.00
- Qualified overtime (the “half”) per check
- $125.00
- Qualified overtime per year
- $3,250.00
- Most you can deduct on one return
- $12,500.00
- Deduction before the income limit
- $3,250.00
- Overtime deduction
- $3,250.00
Above $150,000.00 modified AGI the limit drops by $100 for each $1,000 of extra income (26 U.S.C. § 225(b)(2) and (e)). The real saving depends on your whole return (other income, deductions, credits). The bracket figure is only an estimate. Your paycheck does not change: overtime is still withheld on and still pays Social Security and Medicare.
What is no tax on overtime?
It is a federal income tax deduction for 2025 through 2028. You take it on your yearly return. It lowers the income you pay federal income tax on. It does not make overtime fully tax-free, and it does not change what your employer withholds from each check.
- Only the overtime premium the FLSA requires counts: at time and a half, the extra half of your regular rate for each overtime hour.
- Up to $12,500.00 per return, $25,000.00 on a joint return.
- Above $150,000.00 modified AGI ($300,000.00 joint) the limit drops by $100.00 for each $1,000.00 of extra income (26 U.S.C. § 225(b)(2) and (e)).
- You need a Social Security number on the return. Married people must file jointly.
- You can claim it whether you itemize or take the standard deduction.
How to calculate your overtime deduction
- 1
Find the premium per hour
Regular hourly rate × 0.5. At $20 an hour, the premium is $10.
- 2
Multiply by overtime hours
Use the FLSA overtime hours for the whole year: hours over 40 in each workweek.
- 3
Apply the limit
The deduction is capped at $12,500.00 ($25,000.00 joint), and is lower at higher incomes.
Worked example from the IRS
$20 an hour, 50 hours in a workweek, overtime paid at double time: 10 overtime hours bring $400. The FLSA requires only time and a half, so the qualified overtime is the $10 premium × 10 hours = $100.
Want to see your paycheck with overtime, after tax? Use the overtime calculator.
Open the overtime calculator →Overtime deduction examples for a full year
Qualified overtime for a year of steady overtime: 50 weeks, paid at time and a half, single filer under the income limit. Plain math on the IRS rules above, not a tax bill.
| Hourly rate | OT hours a week | Overtime pay for the year | Qualified overtime | Deduction (single) |
|---|---|---|---|---|
| $18.00 | 5 | $6,750.00 | $2,250.00 | $2,250.00 |
| $22.00 | 8 | $13,200.00 | $4,400.00 | $4,400.00 |
| $25.00 | 10 | $18,750.00 | $6,250.00 | $6,250.00 |
| $30.00 | 10 | $22,500.00 | $7,500.00 | $7,500.00 |
| $40.00 | 15 | $45,000.00 | $15,000.00 | $12,500.00 |
Only one third of time-and-a-half overtime pay is qualified overtime: the extra half, not the full 1.5.
Above $150,000.00 modified AGI ($300,000.00 joint) the limit drops by $100.00 for each $1,000.00 of extra income. Enter your modified AGI in the calculator to apply it. The tax you save depends on your whole return; the calculator’s bracket figure is an estimate.
Is overtime taxed on your paycheck?
Yes. Your overtime is still withheld on for federal income tax, and it still pays Social Security and Medicare. That is why your check does not change. Your employer may not lower withholding for the deduction unless you give them a new Form W-4.
What counts and what does not
- Counts: the FLSA premium, the half-time part of time and a half for hours over 40 in a workweek.
- Does not count: your regular rate for those hours, extra pay above time and a half (like the top half of double time), and overtime paid only under a state law, union contract or company policy beyond what the FLSA requires.
Proof of overtime pay
Keep your pay stubs. Overtime hours, rate and pay on their own line make the qualified amount easy to work out at tax time. Need a clean stub with overtime split out?
Make a pay stub with overtime on its own line and YTD totals.
Make a pay stub · $3.49 →Sources
IRS Fact Sheet FS-2026-13 (August 2026) and the IRS news release on the 2025 law; the phase-out from the law text, 26 U.S.C. § 225(b)(2) and (e); tax brackets from the IRS 2026 inflation adjustments. Page reviewed 2026-10-19. Not tax advice.
Paid hourly with no overtime? Use the hourly paycheck calculator.
FAQ
Is overtime tax-free now?
Not fully. For 2025 to 2028 you can deduct qualified overtime on your federal income tax return. Overtime is still withheld on and still pays Social Security and Medicare.
Is overtime taxed?
Yes. Overtime is taxed and withheld on like regular pay. The no tax on overtime rule is a deduction you take on your yearly federal return. It lowers your taxable income, not your paycheck withholding.
What counts as qualified overtime compensation?
Only the overtime premium the Fair Labor Standards Act requires: the “half” in time and a half. Overtime your employer pays on its own, or under a state law or union contract, beyond what the FLSA requires, does not count.
How much can I deduct?
Up to $12,500.00 a year, or $25,000.00 on a joint return. Above $150,000.00 modified AGI ($300,000.00 joint) the limit drops by $100.00 for each $1,000.00 of extra income.
How do I calculate my overtime deduction?
Multiply your regular hourly rate by 0.5, then by the overtime hours you worked in the year. That is your qualified overtime. Then apply the yearly limit.
I get double time. Does all of it count?
No. The IRS example: $20 an hour, 10 overtime hours paid at double time is $400 of overtime pay, but only $100 (the $10 FLSA premium × 10 hours) is qualified overtime.
Do I need to itemize to get the overtime deduction?
No. The deduction is available whether you itemize or take the standard deduction.
Can married people filing separately claim it?
No. The law allows it for married people only on a joint return, so married filing separately gets $0. You also need a Social Security number on the return.
Does no tax on overtime cover state tax?
This is a federal income tax deduction. It does not change Social Security or Medicare. Whether your state follows it is a state question; check your state tax agency.
Will my paycheck go up?
Not by itself. Your employer may not cut withholding for the deduction unless you give them a new Form W-4.
How much overtime is too much for taxes?
Tax brackets alone never make extra overtime shrink your income tax take-home: only the dollars in a higher bracket are taxed at the higher rate. The deduction has a yearly limit, so overtime premium above it is not deducted.