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No Tax on Overtime Calculator — Free 2026

Estimate your federal tax savings from the new overtime pay deduction under the One Big Beautiful Bill Act (2025–2028). Deduct up to $12,500 ($25,000 MFJ).

Option A: Enter Overtime Premium Directly

The extra pay above your regular rate for all OT hours Please enter a valid amount.

Option B: Calculate from Hours

Please enter a valid rate.
Approx. 6 hours/week × 50 weeks = 300 Please enter valid hours.
Please enter a valid income.

Your Overtime Tax Deduction

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Overtime Premium Pay
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Allowable Deduction
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Estimated Tax Savings
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Marginal Tax Rate
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Phaseout Reduction
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Effective Savings Rate

Under the 2026 OBBBA, employees can deduct up to $12,500 in overtime premium pay from federal taxable income ($25,000 for married filing jointly). This above-the-line deduction phases out at higher incomes.

How It Works

  1. Enter your overtime premium pay
  2. Or use the hourly calculator
  3. Select your filing status and income
  4. Review your tax savings
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Understanding the No Tax on Overtime Deduction

The One Big Beautiful Bill Act introduced a new federal tax deduction for overtime pay, often referred to as "no tax on overtime." Effective for tax years 2025 through 2028, this provision allows eligible employees to deduct the premium portion of their overtime compensation — up to $12,500 per year ($25,000 for married couples filing jointly). This is an above-the-line deduction, meaning you can claim it even if you take the standard deduction.

What Counts as Qualified Overtime Pay?

Only the premium portion of overtime qualifies. If your regular hourly rate is $25 and you earn time-and-a-half ($37.50) for overtime hours, the deductible premium is $12.50 per hour — the amount above your regular rate. For double-time overtime at $50/hr, the premium would be $25 per hour. Your regular-rate pay for those same hours is not deductible. The overtime must be compensated under the Fair Labor Standards Act (FLSA) or equivalent state overtime laws.

Starting with tax year 2026, employers are required to report qualified overtime compensation separately on your W-2 form, simplifying the calculation. For tax year 2025, you may need to calculate the premium yourself using pay stubs or employer records.

Income Phaseout Rules

The deduction phases out at higher income levels. For single filers, the phaseout begins at $150,000 of modified adjusted gross income (MAGI) and the deduction is fully eliminated at $250,000. For married filing jointly, the range is $300,000 to $500,000. The reduction is $100 for every $1,000 of MAGI above the starting threshold, which works out to a 10% reduction rate across the phaseout range. If you also work overtime, our overtime pay calculator can help you estimate your total overtime earnings before applying this deduction.

How Much Can You Save?

Your actual savings depend on the overtime premium you earned, your marginal tax rate, and whether your income triggers the phaseout. A worker earning $30/hr who works 300 overtime hours at time-and-a-half earns $4,500 in overtime premium. In the 22% tax bracket, that deduction saves about $990 in federal taxes. At the maximum $12,500 deduction in the 24% bracket, savings reach $3,000. Combined with the car loan interest deduction, workers can stack multiple OBBB deductions for significant tax relief.

Deduction Cap and Limitations

The maximum deduction is $12,500 per year for single, head of household, and married filing separately filers, and $25,000 for married filing jointly. Salaried exempt employees who do not receive overtime premium pay do not qualify. Self-employed individuals are also excluded from this specific provision (though they may have other deductions available). The deduction covers only federal income tax — it does not reduce FICA (Social Security and Medicare) taxes.

For informational purposes only. This calculator provides estimates based on 2026 federal tax brackets and OBBB provisions. Actual deductions depend on your specific tax situation. Consult a qualified tax professional before making financial decisions.

Frequently Asked Questions

How does the no tax on overtime deduction work?
Under the One Big Beautiful Bill Act, employees can deduct the premium portion of qualified overtime pay — the amount above their regular hourly rate. For example, if your regular rate is $25/hr and you earn time-and-a-half ($37.50/hr) for overtime, the $12.50 premium per overtime hour is deductible. The maximum annual deduction is $12,500 for single filers ($25,000 for married filing jointly).
What is the income limit for the overtime tax deduction?
The deduction phases out for single filers with modified adjusted gross income (MAGI) above $150,000 and is fully eliminated at $250,000. For married couples filing jointly, the phaseout range is $300,000 to $500,000. The deduction is reduced by $100 for each $1,000 of MAGI over the threshold.
Do I need to itemize to claim the overtime deduction?
No. The overtime pay deduction is an above-the-line deduction, meaning you can claim it whether you take the standard deduction or itemize. For tax year 2026 and later, your employer must report overtime pay separately on your W-2 form, making it easier to calculate your deduction.
Who qualifies for the no tax on overtime benefit?
Any employee who receives qualified overtime compensation — pay at a premium rate for hours worked beyond the standard workweek under the Fair Labor Standards Act or similar state laws. Self-employed individuals and salaried exempt employees who do not receive overtime premium pay generally do not qualify. The deduction is available for tax years 2025 through 2028.

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