No tax on overtime calculator
Estimate the federal deduction for your overtime premium under the 2025 to 2028 rules and what it saves you.
- ๐บ๐ธ US federal & state rules
- IRS qualified overtime deduction, tax years 2025 to 2028
- See sources
Estimated federal tax saved
$1,188.00
A $5,400 deduction at your 22% marginal rate
- Overtime pay for the year
- $16,200
- Deductible premium (the half)
- $5,400
- Deduction
- $5,400
This is an example. Enter your numbers above and press the button to see your own result.
- Only the premium half of time-and-a-half that federal law requires counts, not the whole overtime check. The deduction is capped at $12,500 ($25,000 for joint filers) and shrinks by $100 for every $1,000 of income over $150,000 ($300,000 joint). Tax years 2025-2028.
- Nothing changes in your paycheck. Withholding tables do not reflect the deduction, so the benefit arrives as a larger refund or smaller balance due when you file. Social Security and Medicare still apply to all overtime.
- Overtime required only by state law, such as California daily overtime, does not qualify. Some states do not follow the federal deduction for state tax.
- The marginal rate here uses the standard deduction and no other adjustments. Your actual saving depends on your full return.
Show the math
| Overtime hours per year | 8 ร 45 = 360 |
|---|---|
| Premium per hour | $30.00 ร 0.5 = $15.00 |
| Qualified overtime | $5,400 |
| Cap (single) | $12,500 |
| Deduction | $5,400 |
| Tax saved | $5,400 ร 22% = $1,188.00 |
What to do next
How it works
The calculator multiplies your overtime hours by half your regular rate to find the premium, which is the deductible part. It applies the cap, reduces the deduction for income over the phase-out line, and multiplies what is left by your marginal federal rate to estimate the tax saved.
Things to keep in mind
Employers report qualified overtime on your W-2. If your pay stub shows overtime at 2ร or includes state-only daily overtime, the qualified amount is smaller than the total premium you see.
Married couples have to file a joint return to claim it. If you choose married filing separately, the calculator shows $0 because the deduction is not allowed on a separate return.
The deduction is federal. Colorado adds it back for state tax, California has not adopted it, and other states vary, so the state saving may be zero.
Sources
Rules applied as of 2026-01-01. See the sources below for details.
- IRS Fact Sheet FS-2026-13 (Aug 6, 2026) FAQs on qualified overtime deductionChecked 2026-10-19
- IRS FS-2025-03 'One Big Beautiful Bill Act: Tax deductions for working Americans and seniors'Checked 2026-10-19
- Schedule 1-A (Form 1040) 2025 โ phase-out mechanics (2026 version not yet published; dollar thresholds are statutory, not indexed)Checked 2026-10-19
- IRS Publication 15-T (2026), Worksheet 1A + Annual Percentage Method tables (p.10-12), dated Dec 3, 2025Checked 2026-10-19
Frequently asked questions
Is overtime really tax free now?
Not entirely. For 2025 through 2028 you can deduct the premium part of your overtime pay, the extra half of time and a half, from federal taxable income. The base pay for those hours is still taxed, and Social Security and Medicare apply to all of it.
How much can I deduct?
Up to $12,500, or $25,000 on a joint return. The deduction drops by $100 for every $1,000 of income above $150,000 ($300,000 joint), so it disappears at $275,000 single and $550,000 joint.
Does my paycheck get bigger?
No. Withholding tables were not changed for the deduction. You claim it on your return, so the benefit shows up as a bigger refund or a smaller bill in the spring.
Do I have to itemize?
No. The deduction is available whether you take the standard deduction or itemize. You need a valid Social Security number, and married couples must file jointly.
Does state overtime count?
Only overtime required by the federal Fair Labor Standards Act qualifies. Daily overtime that only state law requires, like California's after-8-hours rule, does not. Some states also tax the amount for state purposes.