No Tax on Overtime Calculator (2026)
The One Big Beautiful Bill Act made the premium portion of your overtime pay federally tax-deductible for 2025–2028 — up to $12,500 (single) or $25,000 (married filing jointly). Enter your numbers to see your deduction and estimated savings.
How the overtime deduction actually works
"No tax on overtime" is a real deduction, but the name oversells it slightly — three details matter:
- Only the premium counts. If you earn $20/hour and get $30/hour for overtime, only the extra $10/hour — the "half" in time-and-a-half — is deductible. Our calculator handles this conversion for you (total overtime pay ÷ 3 = the premium).
- It's a federal income tax deduction, not a payroll exemption. Social Security and Medicare taxes still come out of every overtime check, and your state may still tax it. You claim the deduction when you file your federal return.
- You don't need to itemize. This deduction stacks on top of the standard deduction, so it benefits regular W-2 workers.
Limits and income phase-out
The deduction is capped at $12,500 for single filers and $25,000 for married filing jointly. It starts phasing out when modified adjusted gross income passes $150,000 (single) / $300,000 (joint), shrinking by $100 for every $1,000 over the threshold.
What to check on your W-2
Starting with tax year 2026, employers must report qualified overtime separately on your W-2. If you work overtime regularly, make sure your employer is tracking it — the IRS has flagged penalties for incomplete W-2s. Keep your final pay stub of the year as a backup record.
Frequently asked questions
Is overtime completely tax-free now?
No. Only the premium portion (the extra 'half' of time-and-a-half) is deductible from federal income tax, up to $12,500 single / $25,000 joint. Social Security, Medicare, and state taxes still apply to all overtime pay.
Do I need to itemize to claim the overtime deduction?
No. It's an above-the-line-style deduction available on top of the standard deduction — most W-2 employees qualify without itemizing.
What years does the overtime deduction apply to?
Tax years 2025 through 2028. Unless Congress extends it, it expires after the 2028 tax year.
Will my paycheck get bigger right away?
Not automatically. The deduction is claimed on your tax return, so most workers see the benefit as a larger refund. You can adjust your W-4 withholding (the IRS added fields for this in 2026) to see savings in each paycheck instead.
Does salaried overtime or double-time qualify?
The deduction covers overtime premiums required by the Fair Labor Standards Act — generally hourly, non-exempt workers. For double-time, only the FLSA-required half-time premium portion qualifies, not the full extra amount.