Updated for tax year 2026
No Tax on Overtime Calculator
Estimate your federal overtime tax deduction under the One Big Beautiful Bill Act. Enter your pay details — the calculator applies the 2026 caps and MAGI phaseout instantly.
For this estimate, we assume the hourly rate you enter is your FLSA regular rate.
Enter the qualified overtime amount from Box 12, Code TT on your W-2 (reported starting with the 2026 tax year). This is only the premium half of your overtime, not your total overtime pay.
Estimates only, not tax advice. This calculator estimates the federal income-tax benefit of the qualified overtime deduction (claimed on Schedule 1-A). It does not calculate state or local taxes, Social Security, Medicare, or your complete federal tax liability. Married filing separately does not qualify. How we calculate this.
How the calculation works
Only the premium half of FLSA overtime qualifies — the extra 50% in time-and-a-half, not your full overtime pay. The math runs in four steps:
- Qualified premium = overtime hours × (hourly rate × 0.5)
- Apply the cap: $12,500 single / head of household, $25,000 married filing jointly
- Apply the MAGI phaseout: minus $100 for every $1,000 of MAGI over $150,000 single ($300,000 joint)
- Estimated savings = final deduction × your marginal tax rate
2026 overtime tax rules
| Rule | Detail |
|---|---|
| Law | One Big Beautiful Bill Act, signed July 4, 2025 (new IRC §225) |
| Deduction type | Below-the-line federal income tax deduction (Schedule 1-A) — no itemizing needed |
| What qualifies | FLSA-required premium only (0.5× regular rate, hours over 40/week) |
| Annual cap | $12,500 single / head of household · $25,000 married filing jointly |
| MAGI phaseout | Starts $150K single / $300K joint · −$100 per $1K over · gone at $275K / $550K |
| Tax years | 2025–2028 · expires December 31, 2028 unless renewed |
| Still taxed | Social Security, Medicare, and state/local taxes on all overtime |
Who qualifies
Qualifies: nonexempt employees under the Fair Labor Standards Act with a valid Social Security number. Married couples must file jointly to claim it.
Does not qualify: exempt salaried employees, overtime required only by state law (for example California daily overtime under 40 hours a week), union or voluntary premiums above what the FLSA requires, and shift differentials. Most independent contractors and gig workers do not qualify because they are not FLSA employees — the rare exception is a worker treated as an independent contractor for tax purposes who is an employee under the FLSA, whose qualified overtime can be reported on Form 1099-NEC or 1099-MISC. Even where double time is paid, only the 0.5× FLSA premium counts.
Worked example
A single filer earns $25/hour and works 10 overtime hours a week, 52 weeks a year:
- Qualified premium: 520 hours × $12.50 = $6,500
- Cap check: $6,500 is under the $12,500 single cap — full amount kept
- MAGI $60,000 — under the $150,000 phaseout threshold, no reduction
- Estimated savings at 22%: $6,500 × 0.22 = $1,430
How to claim it
Your employer keeps withholding as normal during the year. Starting with 2026 W-2s, qualified overtime premium is reported in Box 12, Code TT. You claim the deduction on Schedule 1-A when you file your federal return — it works whether you itemize or take the standard deduction. It lowers your taxable income, not your AGI. For 2025, the IRS offered transition relief with reasonable reporting methods.
Frequently asked questions
How much tax will I pay on my overtime?
You still pay Social Security, Medicare, and state tax on all overtime pay. For federal income tax, the One Big Beautiful Bill Act lets eligible workers deduct the premium half of FLSA overtime — up to $12,500 single or $25,000 married filing jointly — for tax years 2025 through 2028.
How does no tax on overtime actually work?
It is a federal income tax deduction, not an exemption. Only the premium portion of overtime required by the Fair Labor Standards Act qualifies: the extra half in time-and-a-half. Your employer keeps withholding as normal, and you claim the deduction when you file your return.
How much will no tax on overtime save me?
It depends on your overtime hours, pay rate, filing status, and tax bracket. A single filer earning $25/hour with 10 overtime hours a week has about $6,500 of qualified premium a year — worth roughly $1,430 at a 22% marginal rate. Use the calculator above for your numbers.
Do you pay taxes on overtime money?
Yes. Overtime pay is still subject to Social Security, Medicare, and state/local taxes. The new law only creates a federal income tax deduction for the qualified premium portion, within the caps and income limits.
Do you get a bigger tax refund if you work overtime?
You can, because the deduction lowers your federal taxable income. Withholding does not change during the year unless you submit an updated Form W-4 accounting for your expected overtime deduction — otherwise the benefit arrives when you file, either as a larger refund or a smaller balance due.
Who qualifies for the overtime tax deduction?
Nonexempt employees under the Fair Labor Standards Act with a valid Social Security number. Married couples must file jointly. The deduction phases out above $150,000 MAGI single ($300,000 joint). Exempt salaried workers do not qualify. Most independent contractors and gig workers do not qualify either, because the deduction requires FLSA-qualified overtime — the rare exception is a worker treated as an independent contractor for tax purposes who is an employee under the FLSA, whose qualified overtime can be reported on Form 1099-NEC or 1099-MISC.