No Tax on Overtime Calculator

This no-tax-on-overtime calculator estimates the federal deduction you can take on your overtime premium - the extra "half" of time-and-a-half - for tax years 2025-2028. Enter your hourly rate and overtime hours, and it applies the IRS caps ($12,500 single, $25,000 joint) and the income phase-out to show your deduction and the tax you save.

Updated 16 September 2026

How the overtime deduction works (only the premium half of time-and-a-half)

The deduction applies only to the premium portion of your overtime - the extra amount above your regular rate that the Fair Labor Standards Act requires, not your whole overtime paycheck. If you earn $25 an hour and get time-and-a-half ($37.50) for overtime, the premium is the extra $12.50 per hour, not the full $37.50.

So the calculator multiplies your regular rate by 0.5 and by your overtime hours to find the qualifying premium. That amount is what may be deducted from your federal taxable income, subject to the annual cap and income phase-out below. It reduces the tax you owe on that premium - it doesn't make the pay disappear. See the IRS overview for the rule.

Worked example: $25/hour, 300 overtime hours

Take a warehouse worker earning $25 an hour who works 300 overtime hours across the year.

Overtime premium = $25 × 0.5 × 300 hours = $3,750
That's below the $12,500 single cap, and their income is under $150,000, so nothing is reduced.
Deduction = $3,750. In the 22% bracket, that saves about $825 in federal income tax.

Change the rate, hours or income in the calculator and the deduction and tax saved update instantly. If your premium tops the cap, the deduction stops at $12,500 (single) or $25,000 (joint).

Caps and income phase-out

The deduction is capped at $12,500 for single filers and $25,000 for married couples filing jointly. Above a modified adjusted gross income (MAGI) of $150,000 (single) or $300,000 (joint), the deduction begins to phase out - it shrinks as income rises and eventually reaches zero.

The calculator applies this reduction for you. The exact per-dollar phase-out rate is set in the IRS Schedule 1-A instructions - we're confirming the precise figure against that source, so treat the phased result near the thresholds as an estimate until you check your own return.

What it does not reduce (Social Security, Medicare, state tax)

This is a federal income tax deduction only. It does not reduce the Social Security and Medicare (FICA) taxes withheld from your overtime, and it does not change most state income taxes - many states will still tax the pay in full unless they pass their own law.

In other words, your overtime isn't "tax-free" - it's income-tax-deductible up to the cap. You'll still see FICA come out of your check, and you should check your state's rules separately. The calculator's "tax saved" figure is federal income tax only.

How to claim it on your return

You claim the deduction on new Schedule 1-A when you file your federal return, and you can take it whether you itemize or take the standard deduction. You'll need a valid Social Security number, and if you're married you must file jointly to qualify - married filing separately gets $0.

Your employer reports qualifying overtime, which flows to your return. Keep your pay stubs and W-2 so your figures match what's reported. Always confirm the current process on IRS.gov or with a tax professional before filing.

Frequently asked questions

How does the no tax on overtime work?

It's a federal income-tax deduction on the premium half of your overtime pay - the extra amount above your regular rate - for tax years 2025-2028. You claim it on Schedule 1-A, up to $12,500 (single) or $25,000 (joint), and it phases out at higher incomes. It reduces income tax, not Social Security or Medicare.

How will the no tax on overtime work in 2026?

The same rules apply for tax year 2026 as for 2025: a deduction on your overtime premium up to the cap, phasing out above $150,000 (single) or $300,000 (joint) of income. You'll claim 2026 overtime when you file in early 2027. Use the calculator with your expected 2026 numbers to estimate it.

How soon will no tax on overtime start?

The deduction covers tax years 2025 through 2028. That means overtime worked in 2025 can be claimed on the 2025 return you file in early 2026. It's a deduction claimed at tax time rather than something that removes tax from each paycheck during the year.

How much will no tax on overtime save me?

Your saving is the deductible premium multiplied by your federal tax bracket. For example, a $3,750 premium in the 22% bracket saves about $825. Someone hitting the $12,500 cap in the 24% bracket saves about $3,000. Enter your own numbers above for a personal estimate.

How to calculate your no tax overtime?

Take your regular hourly rate, multiply by 0.5, then by your overtime hours for the year - that's the qualifying premium. Cap it at $12,500 (single) or $25,000 (joint), reduce it if your income is above the threshold, and multiply by your tax rate to estimate the saving. The calculator does all of this.

How much more money will I get with no tax on overtime?

You won't get more in each paycheck automatically - the benefit is a lower federal income-tax bill, realised as a smaller balance due or a larger refund when you file. The amount equals your deductible overtime premium times your tax bracket, up to the annual cap.

How will the no tax on OT work?

"No tax on OT" is shorthand for the overtime deduction: the premium portion of your overtime is deductible from federal taxable income, up to the cap, for 2025-2028. It's claimed on Schedule 1-A at filing time and phases out at higher incomes. It doesn't remove FICA or, usually, state tax.

Do you get a bigger tax refund if you work overtime?

You can, because of this deduction - the overtime premium lowers your taxable income, which can increase your refund or reduce what you owe. But the pay itself is still income, and Social Security and Medicare still apply. The net effect depends on your bracket, total income and withholding.

Sources

Estimates only - not tax advice. Rules summarised from IRS guidance; check IRS.gov or a tax professional before you file.