No Tax on Overtime Calculator
Estimate your federal and state tax savings. See if your state taxes overtime pay and how much extra money you keep.
The No Tax on Overtime Calculator helps U.S. hourly workers estimate how much federal and state tax they could save on overtime pay in 2026. This tool calculates the deductible “premium pay” portion of overtime and checks if states like Texas, California, or New York also provide tax relief.
đ 2025 vs. 2026 Comparison
đ° More Paycheck & Tax Tools
Calculating overtime is just the first step. However, to get a complete financial picture, you should also analyze your regular income. For instance, use the tools below to estimate your take-home pay or contractor taxes.
Check Overtime Tax Rates by StateFurthermore, tax laws vary significantly across the country. Consequently, we have compiled a direct index for all 50 states to help you verify local regulations.
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Colorado
- Connecticut
- Delaware
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kansas
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Minnesota
- Mississippi
- Missouri
- Montana
- Nebraska
- Nevada
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- Rhode Island
- South Carolina
- South Dakota
- Tennessee
- Texas
- Utah
- Vermont
- Virginia
- Washington
- West Virginia
- Wisconsin
- Wyoming
How to Use the No Tax on Overtime Calculator
Getting an accurate estimate of your potential 2026 refund is simple. First, follow these steps to configure the tool:
- Start by Selecting Your State: Choose your location from the dropdown menu. Consequently, the tool will automatically detect if your state has income tax or conforms to federal deductions.
- Next, Choose Your Profession: You can click a “Quick Fill” button (like Nurse or Trucker) to preload common data. Alternatively, enter your specific hourly rate manually.
- Then, Input Overtime Details: Enter your average overtime hours per week. In addition, ensure you select the correct multiplier (1.5x for standard, 2.0x for double time).
- Finally, Calculate Savings: Click the blue button. The tool will subsequently display your projected annual savings compared to the old 2025 tax laws.
Understanding the “No Tax on Overtime” Act of 2026
The “No Tax on Overtime” provision is widely considered the most significant change to hourly compensation in decades. Originally proposed as part of the Tax Cuts and Jobs Act extension package, this legislation aims to incentivize workforce participation by removing the federal tax burden from extra hours worked. Consequently, millions of hourly employees are looking for a reliable No Tax on Overtime Calculator to estimate their potential windfall.
However, there is a widespread misconception that this law makes all overtime earnings completely tax-free. In reality, the legislation is highly specific. It targets only the “premium” portion of your pay, while leaving base wages taxable. Therefore, understanding the mechanics of this calculation is critical for accurate financial planning in 2026.
Furthermore, the bill’s impact varies significantly depending on your location. For instance, workers in states with no income tax (like Texas or Florida) will see the maximum benefit. Conversely, workers in “decoupled” states like California may still owe significant state taxes on their overtime earnings. You can track the bill’s legislative progress directly via Congress.gov.
How the 2026 Overtime Tax Calculator Works
To provide an accurate estimate, our calculator breaks down your paycheck into two distinct components: “Base Pay” and “Premium Pay.” Fundamentally, the IRS treats these two categories differently under the new 2026 tax code proposal.
đ° The Official Calculation Formula
Our tool applies the following logic, which aligns with standard Department of Labor (DOL) definitions of overtime:
- đš Step 1: Base Pay is Taxed. If your standard rate is $30/hr, the first $30 of every overtime hour is still considered “regular income.” Consequently, this portion remains fully subject to federal income tax at your standard bracket.
- đš Step 2: Premium Pay is Deducted. The remaining $15 (the 1.5x “half-time” premium) is the specific dollar amount that qualifies for the “Above-the-Line” Deduction.
- đš Step 3: Double Time Multiplier. Moreover, if you work holidays or Sundays at 2.0x pay, the entire extra 1.0x portion is deductible. As a result, double-time shifts become significantly more valuable than standard overtime.
Who Qualifies for the 2026 Overtime Tax Deduction?
It is important to note that eligibility is strictly tied to your classification under the Fair Labor Standards Act (FLSA). Specifically, the tax cut is designed to benefit “Non-Exempt” hourly workers. Therefore, salaried executives generally do not qualify.
â Eligible Professions for the Tax Cut
- Nurses & Healthcare Professionals: Because mandatory overtime and “crisis pay” are common in hospitals, healthcare workers earning between $40 and $60 per hour are projected to be the primary beneficiaries.
- Police & First Responders: Additionally, law enforcement officers who work special details, holidays, or emergency response shifts will see substantial tax relief.
- Skilled Trades & Construction: Electricians, plumbers, and lineworkers who frequently work seasonal overtime (e.g., storm restoration) will qualify fully for the deduction.
- Supply Chain & Logistics: Furthermore, CDL truck drivers and warehouse leads who consistently exceed 40 hours per week are eligible.
â Disqualified Groups
- Salaried “Exempt” Managers: If you are paid a flat annual salary (e.g., $90,000) and do not receive FLSA-mandated overtime pay, you cannot claim this deduction.
- 1099 Independent Contractors: Crucially, gig workers are considered business owners by the IRS. Since they earn “business income” rather than “wages,” they do not earn “overtime” in the legal sense. (See our 1099 Tax Calculator for more).
Real-Life Examples: No Tax on Overtime Calculator Results
To truly understand the value of this legislation, we must look beyond simple percentages. For example, let’s analyze three complex scenarios involving different state tax laws and overtime multipliers.
đŠââī¸ Scenario A: The Nurse (Texas)
Profile: Sarah, RN in Houston (No State Tax).
Details: $50/hr Base Rate. Works 10 hours OT/week.
Analysis: Since Texas has no state income tax, Sarah faces no “conformity” issues. Consequently, she keeps 100% of the federal benefit.
Net Annual Savings: ~$2,750
⥠Scenario B: The Electrician (California)
Profile: Mike in Los Angeles (High State Tax).
Details: $40/hr Base Rate. Works 15 hours OT/week.
Analysis: California is a “Decoupled” state. Therefore, while Mike saves on federal taxes, he must still pay ~9.3% state tax on his overtime earnings.
Net Annual Savings: ~$1,200
đ Scenario C: The Trucker (Ohio)
Profile: John in Ohio (Rolling Conformity).
Details: $30/hr Base Rate. Works 20 hours OT/week.
Analysis: Ohio uses “Rolling Conformity,” meaning it automatically adopts federal tax cuts. As a result, John saves on both federal and state returns.
Net Annual Savings: ~$3,100
State-by-State 2026 Overtime Tax Conformity Analysis
The single biggest factor affecting your actual take-home pay is your state’s tax code. Unfortunately, the federal government cannot dictate state tax policy, which leads to a split reality for U.S. workers. Consequently, understanding where your state stands regarding the 2026 overtime tax cut is essential.
Category 1: Conforming States (Double Savings)
These states automatically update their tax codes to match federal law. Thus, if the IRS says overtime is deductible, the state agrees immediately. (Examples: Colorado, Michigan). Therefore, residents here enjoy “double savings” on their tax returns.
Category 2: Static or Decoupled States
In contrast, these states are stuck in the past. They must pass a specific new law to accept the overtime deduction. Until then, you likely still owe state tax on those earnings. (Examples: California, Virginia).
Category 3: No Income Tax States
Finally, this is the best-case scenario. Obviously, if there is no state income tax, you receive the full benefit immediately without any complications. (Examples: Florida, Texas, Tennessee).
Strategic Planning for the No Tax on Overtime Calculator
The “No Tax on Overtime” benefit is not automatic for everyone. In fact, high earners and those in “decoupled” states need a specific financial strategy to protect their refund. Moreover, without proper planning, you might accidentally trigger income phaseouts that disqualify you from the deduction.
Strategy 1: Avoid the Income Phaseout
Current drafts of the 2026 legislation suggest a phaseout for single filers earning over $150,000. Consequently, if your overtime pushes your total annual income above this limit, you begin to lose the deduction dollar-for-dollar.
The Solution: You can lower your Adjusted Gross Income (AGI) intentionally. For example, by maximizing your Traditional 401(k) contribution (approx. $23,500), you reduce your taxable AGI. As a result, you may drop back below the threshold and reclaim the full overtime tax benefit.
Strategy 2: W-4 Adjustment for Immediate Cash
Many workers make the mistake of waiting until April 2027 to claim their refund. However, this essentially gives the IRS an interest-free loan for 12 months. Instead, you should aim to get that money now.
The Solution: Update your W-4 form with your employer immediately in January 2026. Specifically, use the “Deductions” worksheet to account for your estimated overtime relief. Therefore, instead of a large refund check later, you will see a larger paycheck every single week.
How to Report Overtime on Your 2026 Tax Return
Filing your taxes for the 2026 tax year (filed in early 2027) will require attention to detail. Typically, the IRS will introduce specific reporting codes to track these “Qualified Premium Wages.”
Step 1: Review Your W-2 for Overtime Codes
First, look for a new code in Box 12 (likely Code TT or similar) or a specific notation in Box 14. Furthermore, your employer is responsible for tracking these hours separately from your base pay throughout the year.
Step 2: File Form 1040 Schedule 1
Next, you will likely enter your total “Premium Pay” as an “Above-the-Line” deduction on Schedule 1. Consequently, this lowers your taxable income before standard deductions are applied, which is a massive advantage for tax planning.
Frequently Asked Questions About 2026 Overtime Taxes
We have compiled the most common questions regarding the No Tax on Overtime Calculator and the 2026 legislation.
General Rules for No Tax on Overtime
Is overtime fully tax-free in 2026?
Is the No Tax on Overtime law guaranteed?
Does this affect my Social Security benefits?
Eligibility for the Overtime Tax Calculator
Does this apply to bonuses or commissions?
Does double time count?
State Tax and Multiple Job Scenarios
What if I work two different jobs?
Does California tax overtime pay?
This calculator is based on the proposed “Tax Cuts and Jobs Act” extension drafts for the 2026 tax year and IRS guidance on qualified compensation. Actual tax liability may vary based on final legislative text and state conformity updates. This page is for educational purposes and does not constitute professional tax advice. Consult a CPA for your specific situation.