No Tax on Overtime Calculator

"No tax on overtime" is the informal name for a new federal income tax deduction created by the One, Big, Beautiful Bill Act (OBBBA) and in effect for tax years 2025 through 2028. Despite the name, it isn't a blanket exemption from tax on overtime pay. It's an above-the-line deduction, meaning you can claim it whether you itemize or take the standard deduction, that reduces your federal taxable income by up to $12,500 if you're single or filing as head of household, or $25,000 if you're married filing jointly. The deduction is claimed on the new Schedule 1-A attached to your Form 1040, not as a change to your paycheck withholding during the year.

That distinction matters more than it sounds like it should. Your employer still withholds federal income tax, Social Security, and Medicare on your full overtime pay throughout the year exactly as before. The deduction only shows up when you file your return: it lowers the taxable income your federal tax bill is calculated on, which typically means a larger refund or a smaller amount owed, not a bigger paycheck today.

The deduction only covers "qualified overtime compensation," which the law defines narrowly: it's just the extra amount you're paid for overtime hours above what you'd earn for the same hours at your regular rate. In other words, it's the "half" in time-and-a-half, not the whole time-and-a-half payment.

Say your regular hourly rate is $22 and you work 240 overtime hours in a year at time-and-a-half, or $33 an hour. Your full overtime pay for those hours is $7,920. But the qualified portion the deduction actually applies to is only the premium: $22 × 0.5 = $11 per overtime hour, times 240 hours, which comes to $2,640. That $2,640 figure, not the $7,920 you were actually paid, is what goes toward your deduction cap. This is by far the most common point of confusion people run into, and it's the reason this calculator exists as three separate input modes rather than one.

The deduction only covers overtime required by the federal Fair Labor Standards Act (FLSA), which generally means hours worked past 40 in a single workweek. Overtime you're paid because of a state law, a union contract, or a voluntary employer policy that goes beyond what FLSA requires does not qualify, even though it appears as "overtime" on your paycheck.

This matters most in states with daily overtime rules on top of the federal weekly rule, most notably California, which generally requires overtime pay for hours past 8 in a single day. A California worker's overtime pay can be a mix of FLSA-qualifying and state-only overtime, and only the FLSA-qualifying portion is deductible. See FLSA vs. state overtime and this deductionfor the full breakdown, and the state-by-state guidefor how your specific state's overtime rules interact with this deduction.

The maximum deduction is $12,500 for single or head-of-household filers, or $25,000 for married couples filing jointly, and that joint cap applies once per return even if both spouses have qualified overtime, not $25,000 per spouse. Above a modified adjusted gross income (MAGI) of $150,000 single or $300,000 married filing jointly, the cap starts shrinking: it's reduced by $100 for every full $1,000 your MAGI is over the threshold, per the actual IRS Schedule 1-A worksheet. At $275,000 MAGI single (or $550,000 married filing jointly), the cap reaches zero and the deduction is fully phased out. This calculator shows the reduction and, once it applies, the fully-phased-out state as its own line so the arithmetic is never hidden inside a single number.

Married taxpayers must file jointly to claim this deduction; married filing separately is not eligible at all, regardless of income. You (or your spouse, whoever earned the overtime) also need a valid Social Security number on the return. Seewho qualifies for the no tax on overtime deductionfor the full eligibility picture, including exempt (salaried, non-overtime-eligible) employees, who generally have no qualified overtime to deduct in the first place.

This deduction doesn't change what's withheld from your paycheck during the year. Federal income tax, Social Security, and Medicare are all still withheld on your full wages, overtime premium included, exactly as they would be without this deduction. The benefit only appears when you file your return: it lowers your taxable income, which lowers your federal tax liability, which typically means a larger refund or a smaller amount you owe. If you want to see the estimated tax savings broken out from the FICA that's still withheld, that's exactly what the calculator above shows as two separate lines.

Before you can figure out the tax side, it helps to know how overtime pay works in the first place, since a lot of the confusion around this deduction actually starts here. Under the Fair Labor Standards Act, non-exempt employees earn 1.5 times their regular hourly rate for every hour worked past 40 in a single workweek. If your rate is $18 an hour and you put in 45 hours, your first 40 hours pay out at $18 and the last 5 pay out at $27. That's the standard "time and a half" formula behind almost every overtime pay calculator, and it's separate from the deduction math above, this calculator handles both so you don't have to run the numbers twice.

If your pay is more complicated than a single flat rate, say you work two roles at different rates, or earn a shift differential or a non-discretionary bonus on top of your base pay, the FLSA requires your overtime rate to be based on a weighted average of everything you earned that week, not just your lowest or base rate. That blended number is still what the "premium" half comes from for deduction purposes. If your own pay stubs already show a total overtime dollar amount, skip the estimating entirely and plug that figure straight into the calculator's third input mode.

This calculator isn't a replacement for the software you actually file with. TurboTax and H&R Block have both added support for the new Schedule 1-A and will calculate your final deduction automatically once you enter the code TT amount from box 14 of your W-2. What this tool is useful for is the weeks and months before that, when you want a quick, no-signup estimate of what to expect, or when you're checking whether the number your filing software produced actually looks right.

It's also worth knowing this deduction never touches your paycheck through ADP or any other payroll provider. Withholding for federal income tax, Social Security, and Medicare stays exactly the same all year, on your full wages including the overtime premium. There's no box to check with your employer and no W-4 setting that captures this benefit early; it only shows up once, on your federal return, not gradually through the year. The IRS itself doesn't host an interactive calculator either, only the Schedule 1-A instructions and worksheet, which is the same phase-out formula this calculator runs for you automatically.

The deduction applies to tax years 2025 through 2028 and is currently scheduled to expire after that unless Congress extends it. If you're planning further ahead than 2028, don't build long-term financial plans around this deduction continuing past that year.

This is general information, not tax advice, and it's based on published IRS guidance for tax years 2025–2028. See the disclaimer above the calculator's results for details, and confirm with a tax professional or the IRS before filing.