- Tax you still pay $0
- Tax you save $0
- Without deduction $0
| Total overtime pay | – |
| Qualified premium (the "half") | $0 |
| Cap for your filing status | $0 |
| Phase-out reduction | $0 |
| Deduction on Schedule 1-A | $0 |
How the no tax on overtime deduction works
The 2025 tax law (the One Big Beautiful Bill Act) created a new deduction for qualified overtime compensation. It applies to tax years 2025, 2026, 2027 and 2028, and you claim it on the new Schedule 1-A of Form 1040, whether you take the standard deduction or itemize.
"Qualified overtime" is only the premium part required by the Fair Labor Standards Act (FLSA): the extra half of your regular rate for hours over 40 in a week. If you earn $25 an hour, your overtime rate is $37.50, and only the extra $12.50 per hour is deductible.
The formula this calculator uses
- Premium = regular rate × 0.5 × overtime hours (or total time-and-a-half pay ÷ 3).
- Cap: the smaller of your premium or $12,500 ($25,000 married filing jointly).
- Phase-out: subtract $100 for each $1,000 of MAGI over $150,000 ($300,000 joint).
- Tax saved: your federal income tax with and without the deduction, using the IRS brackets and standard deduction for the year.
Example
A single worker earns $25/hour and works 8 overtime hours a week for 40 weeks. Overtime hours = 320. Premium = $25 × 0.5 × 320 = $4,000. With MAGI of $65,000 (under $150,000), the full $4,000 is deductible. In the 12% bracket, that saves about $480 of federal income tax for 2026.
Who qualifies
- You are paid overtime required by the FLSA (most hourly, non-exempt workers).
- You have a valid Social Security number, and you file jointly if married.
- The overtime is reported on your W-2, 1099 or another statement from your employer.
Overtime that is only required by a state law, a union contract or company policy (for example double time, or daily overtime in California) does not count beyond the federal half-time premium.
Frequently asked questions
Is all of my overtime pay tax-free?
No. Only the premium part is deductible: the extra half of your regular rate in time-and-a-half. The base part of each overtime hour is still taxed as normal.
How much overtime can I deduct?
Up to $12,500 per year, or $25,000 if married filing jointly, for tax years 2025 through 2028.
Is there an income limit for no tax on overtime?
Yes. The deduction is reduced by $100 for every $1,000 of modified AGI above $150,000 ($300,000 joint). A single filer with a full $12,500 deduction loses it all at $275,000.
Does no tax on overtime cover Social Security and Medicare?
No. It is a federal income tax deduction only. Social Security, Medicare and most state income taxes still apply to overtime pay.
Do I need to itemize to claim it?
No. You claim it on Schedule 1-A of Form 1040 whether you take the standard deduction or itemize.
Does double time count?
Only the federal FLSA premium counts, which is half your regular rate. Extra pay above time-and-a-half, or overtime required only by state law or a contract, is not qualified overtime.
Related calculators
Sources
- IRS Fact Sheet FS-2025-03: tax deductions for working Americans and seniors
- IRS: tax year 2026 inflation adjustments (brackets and standard deduction)
- IRS: One, Big, Beautiful Bill provisions for individuals and workers
This calculator gives an estimate of federal income tax only, using IRS figures for tax years 2025 and 2026. It does not cover state tax, Social Security or Medicare tax, credits, or every rule on Schedule 1-A. It is not tax advice; check your return with tax software or a tax professional.