No Tax on Overtime Calculator (2026)
Estimate your 2026 qualified overtime deduction and how much federal income tax it saves. Enter your hourly rate and overtime hours to see the part of your overtime that is deductible, the $12,500 or $25,000 cap and the income phase-out.
Free · No sign-up · Runs in your browser · Last reviewed November 2026
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About the No Tax on Overtime Calculator
The no tax on overtime rule is a federal income tax deduction created by the One Big Beautiful Bill Act for tax years 2025 through 2028. It lets employees deduct qualified overtime compensation of up to $12,500 a year, or $25,000 on a joint return. It is a deduction on your tax return, not an exemption on your paycheck: overtime is still subject to Social Security, Medicare and, in most states, state income tax. This calculator estimates the qualified amount, the deduction and the federal tax you save in 2026.
How to use it
- Enter your regular hourly rate and the overtime hours you usually work each week.
- Choose how your overtime is paid, how many weeks a year you work overtime, your filing status and any other household income.
- Read the qualified overtime amount, your deduction after the cap and phase-out, and the estimated federal income tax savings.
How the overtime deduction is calculated
Qualified overtime = regular hourly rate × 0.5 × overtime hours. Only the premium above your regular rate counts. At $30 an hour with 10 overtime hours a week for 50 weeks, total overtime pay is $22,500 but the qualified premium is $7,500. That $7,500 is deducted from taxable income, which saves a single filer about $1,650 of federal income tax in 2026.
- Cap: $12,500 per year, or $25,000 for married couples filing jointly.
- Phase-out: reduced by $100 for each $1,000 of modified adjusted gross income above $150,000 ($300,000 joint).
- Tax savings: the deduction multiplied by your marginal federal bracket (10% to 37%).
- Still taxed: Social Security (6.2%) and Medicare (1.45%) apply to all overtime pay.
Overtime tax savings by hourly wage (2026)
Single filer working 40 regular hours plus overtime paid at time and a half, 50 weeks a year, standard deduction, no other income:
| Hourly wage | Overtime per week | Overtime pay / year | Qualified premium | Deduction | Federal tax saved |
|---|---|---|---|---|---|
| $18/hour | 5 h | $6,750 | $2,250 | $2,250 | $270 |
| $18/hour | 10 h | $13,500 | $4,500 | $4,500 | $540 |
| $22/hour | 5 h | $8,250 | $2,750 | $2,750 | $330 |
| $22/hour | 10 h | $16,500 | $5,500 | $5,500 | $660 |
| $25/hour | 5 h | $9,375 | $3,125 | $3,125 | $375 |
| $25/hour | 10 h | $18,750 | $6,250 | $6,250 | $1,175 |
| $30/hour | 5 h | $11,250 | $3,750 | $3,750 | $825 |
| $30/hour | 10 h | $22,500 | $7,500 | $7,500 | $1,650 |
| $35/hour | 5 h | $13,125 | $4,375 | $4,375 | $962 |
| $35/hour | 10 h | $26,250 | $8,750 | $8,750 | $1,925 |
| $40/hour | 5 h | $15,000 | $5,000 | $5,000 | $1,100 |
| $40/hour | 10 h | $30,000 | $10,000 | $10,000 | $2,200 |
| $50/hour | 5 h | $18,750 | $6,250 | $6,250 | $1,394 |
| $50/hour | 10 h | $37,500 | $12,500 | $12,500 | $3,000 |
Income phase-out of the overtime deduction
The maximum deduction shrinks as income rises above the threshold:
| Income (single) | Maximum deduction | Income (married filing jointly) | Maximum deduction |
|---|---|---|---|
| $150,000 | $12,500 | $300,000 | $25,000 |
| $160,000 | $11,500 | $320,000 | $23,000 |
| $175,000 | $10,000 | $350,000 | $20,000 |
| $200,000 | $7,500 | $400,000 | $15,000 |
| $250,000 | $2,500 | $500,000 | $5,000 |
| $275,000 | $0 | $550,000 | $0 |
What counts as qualified overtime
- Overtime required by the federal Fair Labor Standards Act: hours over 40 in a workweek paid at least at time and a half.
- Only the premium portion (the half in time and a half) is deductible, not the full overtime wage.
- You need a valid Social Security number, and married taxpayers must file jointly.
- The deduction is available whether you itemize or take the standard deduction, and it is claimed on Schedule 1-A of Form 1040.
- For 2026 your employer reports the qualified amount on Form W-2, box 12, code TT.
Frequently asked questions
Is overtime tax-free in 2026?
Not entirely. From 2025 through 2028 you can deduct qualified overtime compensation from your federal taxable income, up to $12,500 a year ($25,000 on a joint return). Only the overtime premium counts, which is the extra half in time and a half. Social Security, Medicare and most state income taxes still apply to all of your overtime pay.
How much overtime can I deduct?
The premium part of your overtime, up to $12,500 a year, or $25,000 if you are married filing jointly. For example, at $30 an hour with 10 overtime hours a week for 50 weeks, your overtime pay is $22,500 but the qualified premium is $7,500, so the deduction is $7,500.
How much tax does the overtime deduction save?
It saves the deduction multiplied by your marginal federal tax rate. A $5,000 deduction saves about $600 in the 12% bracket, $1,100 in the 22% bracket and $1,200 in the 24% bracket. The calculator applies the 2026 brackets to your own numbers.
What is the income limit for no tax on overtime?
The deduction starts to phase out when modified adjusted gross income is above $150,000, or $300,000 for joint filers. It is reduced by $100 for every $1,000 of income over the limit, so the full $12,500 is gone at $275,000 for a single filer and the full $25,000 at $550,000 for joint filers.
Does double time count for the overtime deduction?
Only the premium required by the Fair Labor Standards Act counts, which is half of your regular rate for each overtime hour. If you are paid double time, the deductible part is still the half-time premium, not the full extra hour of pay.
Will my paycheck withholding go down automatically?
Not necessarily. Overtime is still subject to federal income tax withholding unless you update your Form W-4 to reflect the expected deduction. Otherwise you receive the benefit as a larger refund or a smaller balance due when you file your return.
Where is qualified overtime reported?
For tax year 2026 employers report qualified overtime compensation on Form W-2 in box 12 with code TT, and you claim the deduction on Schedule 1-A of Form 1040. You can claim it whether you itemize or take the standard deduction.
Who can claim the no tax on overtime deduction?
Employees who receive overtime pay required by the Fair Labor Standards Act, have a valid Social Security number and, if married, file a joint return. Married couples filing separately cannot claim it.
Official sources
Last reviewed: November 2026. Estimate for planning only, not tax advice. Your actual deduction depends on your Form W-2 and your tax return.