No Tax on Overtime Calculator 2026: Free Savings Estimator

This free calculator estimates your federal “no tax on overtime” deduction under the One Big Beautiful Bill Act (OBBBA) — including the FLSA premium-only rule, the income phase-out, and your filing-status cap. No sign-up required.

✔️ Based on IRC §225 / Schedule 1-A rules ✔️ Reflects enacted 2025–2028 law ✔️ Educational estimate only
This is enacted law, not a proposal. The qualified overtime compensation deduction was signed into law on July 4, 2025 as part of the OBBBA and applies retroactively from tax year 2025 through 2028. It is a federal income tax deduction on the overtime premium — not a blanket tax exemption on overtime pay.

Is overtime really tax-free in 2026?

No. Under the OBBBA, eligible workers can deduct their qualified overtime premium — the extra half of time-and-a-half pay, not the full overtime paycheck — from federal taxable income, up to $12,500 (single) or $25,000 (joint) per year, phasing out above $150,000 / $300,000 MAGI. Social Security, Medicare, and most state income taxes still apply. See the calculator and breakdown below for your numbers.

“No tax on overtime” is one of the most misunderstood tax changes of 2026. It doesn’t make overtime pay tax-free.

It creates a temporary federal income tax deduction for the FLSA overtime premium, capped by filing status and reduced for higher earners.

This calculator runs the actual statutory math: it isolates the deductible premium from your total overtime pay, applies your filing-status cap, and checks whether the MAGI phase-out reduces it. It also shows what you still owe regardless — payroll taxes, and in most states, state income tax.

Using it takes under a minute. Enter your regular hourly rate, weekly overtime hours, weeks worked, and the multiplier your employer actually pays for overtime.

Set your filing status and household MAGI. The deduction phases out above $150,000 (single) or $300,000 (joint), and is unavailable entirely to Married Filing Separately filers.

Then pick your state to see whether it taxes wages at all, and confirm separately whether your state currently allows this deduction against state tax — since most don’t yet.

Every rule used here — the premium-only calculation, the phase-out formula, the filing-status exclusion, the FICA carve-out — is explained in full, with sources, in the Methodology section below.

How to Use the No Tax on Overtime Calculator

1

Enter your pay details

Your regular hourly rate, weekly overtime hours, weeks worked, and the multiplier your employer actually pays.

2

Set filing status & income

Single, Joint, or MFS, plus household MAGI — this sets your cap and checks the phase-out.

3

Select your state

See if your state taxes wages at all, then confirm separately if it currently allows this deduction.

4

Review your savings

See your qualified premium, cap, phase-out reduction, and estimated federal/state savings.

👩‍⚕️ Nurse
🚓 Police / Fire
🏗️ Trade Worker
🚛 Trucker
$
Only the FLSA-required 0.5× premium is deductible. Anything your employer pays above 1.5× is real income, but it doesn’t qualify for this deduction.
This calculator applies one flat bracket for simplicity — your actual savings depend on your full return.
$
Used to check the phase-out: reduction starts above $150,000 (single) or $300,000 (joint).
Rate auto-fills as a starting point for the state’s top marginal wage tax rate. This is a general rate, not an overtime-specific one — adjust it to your actual bracket.

Results

⚠️ Married Filing Separately is not eligible for this deduction under the statute, regardless of income. The figures below will show $0 federal savings for this filing status.
Estimated Total Tax Savings
$1,430
Federal savings only — state savings need confirmation above
FLSA-Qualified Premium$6,500
Allowable Deduction$6,500
Total Overtime Premium Pay Generated$6,500
FLSA-Qualified Premium (0.5× base rate)$6,500
Deduction Cap (Filing Status)$12,500
Phase-Out Reduction (MAGI)-$0
Allowable Federal Deduction$6,500
Estimated Federal Tax Savings$1,430
Estimated State Tax Savings$0
Payroll (FICA) Tax Still Owed on Premium$497
Net Federal Tax on Premium (After Deduction)$0
Note: Your FLSA-qualified premium exceeds the federal deduction cap for your filing status. The deduction is limited to the cap (before any phase-out).
*This tool applies one flat federal bracket and does not account for standard deductions, other credits, or your full tax return. It is not tax advice — see the Methodology and Disclaimer sections below.

What “No Tax on Overtime” Actually Means

The phrase “no tax on overtime” refers to a provision of the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025. It created a new, temporary federal income tax deduction — codified at IRC §225 — for “qualified overtime compensation.” It runs for tax years 2025 through 2028 and, absent further legislation, expires after that.

It is a deduction, not an exemption. Overtime pay is still reported as ordinary income, and 100% of it is still subject to payroll withholding throughout the year.

The benefit shows up when you file your return: you subtract your qualified overtime premium — up to the cap — from your taxable income, which lowers your federal tax bill or increases your refund. According to Treasury Department figures, more than 29 million taxpayers claimed the deduction for the 2025 tax year, with an average deduction above $3,100.

💡 Only the “premium,” not the paycheck

The deduction covers only the FLSA overtime premium: the extra 0.5× on top of your regular rate that federal law requires for hours over 40 in a week. If your regular rate is $20/hour and you’re paid $30/hour for overtime, only the $10/hour premium is deductible — the other $20/hour was already taxed the same as regular wages, deduction or not.

How the Deduction Is Calculated

The qualifying amount is your FLSA overtime premium: 0.5 × your regular hourly rate × qualifying overtime hours. If your employer voluntarily pays more than time-and-a-half (double time, holiday premiums, etc.), the extra above the FLSA-required 0.5× is real income but isn’t part of the deductible amount. That qualifying premium is then capped and, for higher earners, reduced by the phase-out below.

Filing StatusAnnual Deduction CapPhase-Out StartsFully Phased Out At
Single / Head of Household$12,500$150,000 MAGI~$275,000 MAGI
Married Filing Jointly$25,000$300,000 MAGI~$550,000 MAGI
Married Filing Separately$0 — not eligible

The Income Phase-Out, With an Example

Once MAGI exceeds the threshold, the deduction is reduced by $100 for every $1,000 of MAGI above it — not eliminated outright. For a single filer with $190,000 MAGI: the excess over $150,000 is $40,000, so the reduction is ($40,000 ÷ $1,000) × $100 = $4,000. Their allowable deduction is $12,500 − $4,000 = $8,500, assuming their qualifying premium was at least that much.

Most hourly overtime workers earn well under $150,000, so the phase-out won’t apply to them at all — it mainly affects higher earners with significant other household income.

Who Can’t Claim It

  • Married Filing Separately filers — excluded entirely by statute, at any income level.
  • Salaried, FLSA-exempt employees — the deduction only applies to overtime required under the Fair Labor Standards Act; if you don’t legally qualify for FLSA overtime, you have no “qualified overtime compensation” to deduct.
  • Overtime required only by state law or a union contract, beyond what FLSA requires — only the federally-mandated portion counts, even if your state or contract requires a richer overtime rate.
  • Very low earners with no federal income tax liability — the deduction reduces taxable income, so it has no value if you don’t owe federal income tax in the first place.

What Still Gets Taxed

⚠️ Payroll taxes are unaffected

Social Security (6.2%) and Medicare (1.45%) — 7.65% combined — are still withheld from every dollar of overtime pay, deduction or not. Your employer still pays its matching share. This deduction only changes what you owe in federal income tax when you file.

The same goes for the straight-time portion of your overtime hours: the base rate you’d have earned anyway is taxed exactly like regular wages. Only the premium half is deductible, and only up to the cap.

Does Your State Tax Overtime Too?

Nine states have no tax on wage income at all, so overtime pay is already untaxed there regardless of federal rules: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Everywhere else, whether the federal deduction also lowers your state tax bill depends entirely on whether your state’s legislature has separately voted to adopt it.

Most states use federal adjusted gross income (AGI) as their own starting point for state tax — a figure calculated above where this deduction applies on the federal return. So the deduction doesn’t automatically flow through to state returns; a state has to pass its own conformity legislation for residents to get the benefit at the state level.

As of mid-2026, this is a fast-moving, state-by-state situation. Some states have acted or are actively considering it, others have explicitly declined to conform, and many hadn’t decided either way.

Because that status changes with each legislative session, this calculator doesn’t guess for you. Check your own state’s treatment before assuming your state savings are real, and only tick the confirmation box above if you’ve verified it.

Worked Example

A single warehouse worker earning $22/hour, working 8 overtime hours/week at the standard 1.5× rate, 50 weeks/year, MAGI $58,000, 12% federal bracket, no state income tax:

  • FLSA-qualified premium: $22 × 0.5 × 8 × 50 = $4,400
  • Deduction cap (single): $12,500 — premium is under the cap, so nothing is lost to the cap
  • MAGI is under $150,000, so no phase-out reduction applies
  • Allowable federal deduction: $4,400
  • Estimated federal tax savings at 12%: $4,400 × 12% = $528
  • FICA still owed on the $4,400 premium (7.65%): $336.60 — unaffected by this deduction

How to Claim the Deduction

You claim it on Schedule 1-A, filed alongside Form 1040. For the 2025 tax year, the IRS gave employers transition relief and didn’t require them to separately report qualified overtime on the W-2, so many workers had to estimate the amount from pay stubs or a year-end payroll statement. Starting with tax year 2026, employers are required to report the qualifying amount in Box 12 using code TT on the W-2, which should make the 2026 filing season simpler than the first year.

Frequently Asked Questions — No Tax on Overtime Calculator

Is overtime pay really tax-free in 2026?
No. “No tax on overtime” is a federal income tax deduction, not a tax exemption. Eligible workers can deduct their qualified overtime premium — up to $12,500 (single) or $25,000 (joint) — from federal taxable income for tax years 2025 through 2028. Payroll taxes (Social Security and Medicare) still apply, and most states still tax overtime in full.
Is this deduction a proposal or is it actually law?
It is current law. The qualified overtime compensation deduction was enacted as part of the One Big Beautiful Bill Act (OBBBA), signed on July 4, 2025, and applies retroactively to the 2025 tax year through 2028.
How much of my overtime pay can I actually deduct?
Only the FLSA overtime premium — the extra half of time-and-a-half pay, not your full overtime earnings. If your regular rate is $20/hour and you’re paid $30/hour for overtime, only the $10/hour premium counts toward the deduction, and that’s capped at $12,500 (single) or $25,000 (joint) per year before any phase-out.
What is the income phase-out for the overtime deduction?
The deduction phases out once modified adjusted gross income (MAGI) exceeds $150,000 for single filers or $300,000 for joint filers. It’s reduced by $100 for every $1,000 of MAGI above the threshold, reaching $0 around $275,000 MAGI for single filers and $550,000 for joint filers.
Can married couples filing separately claim the overtime deduction?
No. The statute specifically excludes taxpayers who use Married Filing Separately status, with no exception, regardless of income.
Do I still pay Social Security and Medicare tax on overtime?
Yes. The deduction only applies to federal income tax. FICA payroll taxes — 6.2% Social Security and 1.45% Medicare — are withheld from overtime pay exactly as before, and your employer still pays a matching share.
Does my state also exempt overtime from tax?
Usually not. Nine states have no tax on wage income at all (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming), so overtime is already untaxed there. In every other state, the federal deduction only reduces your state tax bill if your state legislature has separately voted to adopt it — most had not as of mid-2026, though this is changing state by state.
How do I actually claim the deduction on my tax return?
You claim it on Schedule 1-A, filed with Form 1040. For the 2025 tax year, employers weren’t required to report qualified overtime separately, so many workers estimated the amount from pay stubs. Starting with tax year 2026, employers must report it in Box 12 using code TT on your W-2.

Methodology — How This Calculator Works

The FLSA-qualified overtime premium is calculated as 0.5 × your entered regular hourly rate × weekly overtime hours × weeks worked per year. This fixed 0.5× multiplier reflects the statutory FLSA premium regardless of what overtime multiplier you select, since only that portion is deductible under IRC §225. The multiplier you choose is used only to show your total overtime premium pay generated, for comparison.

The qualifying amount is capped at $12,500 for Single/Head of Household or $25,000 for Married Filing Jointly, and reduced to $0 for Married Filing Separately regardless of any other input.

If entered MAGI exceeds $150,000 (single) or $300,000 (joint), the cap is reduced by $100 for every $1,000 of MAGI above the threshold, floored at $0 — matching the statutory phase-out formula described in current IRS guidance.

Federal tax savings are estimated by multiplying the allowable deduction by a single selected federal bracket — this is a simplification and does not model your full progressive tax return, standard deduction, or other credits.

State tax savings are only calculated if you’ve checked the box confirming your state currently allows the deduction against state tax. Otherwise the calculator shows $0 in state savings even if a state rate is entered, since assuming conformity that doesn’t exist would overstate your actual savings.

FICA (payroll tax) owed is shown as a fixed 7.65% of your total overtime premium pay, for context. It isn’t affected by this deduction in any way and is not part of the “savings” total.

This calculator does not model: self-employment tax treatment, the separate “No Tax on Tips” deduction, other above-the-line deductions or credits that affect MAGI, or account-specific state legislation passed after publication. All figures reflect enacted federal law (OBBBA, IRC §225) as published through mid-2026 and are estimates for planning purposes only.

Related Tools

Disclaimer This is an independent, unofficial estimation tool built and maintained by Ultimate Info Guide. It is not produced or endorsed by the IRS, the U.S. Treasury, or any government agency, and it is not tax, legal, or financial advice. Figures reflect the qualified overtime compensation deduction (IRC §225) enacted under the One Big Beautiful Bill Act, signed July 4, 2025, covering tax years 2025–2028, as understood from published IRS guidance current through mid-2026. IRS guidance, forms, and state conformity continue to evolve — always confirm your exact eligibility, qualifying amount, and state treatment with a licensed tax professional or the IRS before filing.

💰 More Paycheck & Tax Tools

Calculating your overtime savings is just step one. To get the full financial picture, you need to look at your regular paycheck too. Check out these other free tools to estimate your take-home pay or contractor taxes.

👤 By: Editorial Team 📅 Last Updated: March 2026 ⚖️ Bill Status: 🟡 Proposed (Not Active Law)
What does the No Tax on Overtime Calculator do?

The No Tax on Overtime Calculator estimates your potential take-home pay under the 2026 tax proposal. It separates your "Base Pay" from your "Premium Pay" to determine exactly how much of your overtime earnings could be federally tax-free based on your state and filing status.

How to Use This Calculator

We built this tool to cut through the noise and give you a real dollar amount. Here is the easiest way to get an accurate number:

  1. Select Your State First: This is the most important step. Tax laws in Texas are completely different from California. The tool will adjust the math based on where you live.
  2. Pick Your Job: You can use the "Quick Fill" buttons for common jobs like Nursing or Trucking, or just type in your exact hourly rate.
  3. Add Your Overtime: Be honest with your averages. If you usually work 50 hours a week, put 10 in the overtime box. Make sure the multiplier (1.5x or 2.0x) matches your pay stub.
  4. See Your Savings: Hit the blue button. We'll show you exactly how much extra cash you could keep in 2026 using this No Tax on Overtime Calculator compared to old rules.

What is the "No Tax on Overtime" Act?

If you work hourly, this might be the biggest change to your paycheck in decades. The idea is simple: work more hours, keep more of your money.

But here's what most people don't realize: This law doesn't make your entire paycheck tax-free. It also doesn't mean every single dollar earned during overtime is untaxed. The legislation is very specific about which part of your pay gets the tax break.

Also, where you live matters—a lot. If you are in a state with high income tax that doesn't follow federal rules (like California), your savings will look very different from someone in Florida. You can track the bill's current status on Congress.gov.

How the Math Actually Works

To see where the savings come from, you have to stop looking at your overtime pay as one big number. The IRS sees it as two separate buckets.

💰 The 3-Step Breakdown

Let's say you earn $30/hour. When you work overtime, you earn $45/hour. Here is how the tax cut splits that up:

  • 🔹 The "Old" Money ($30): The first $30 of that overtime hour is treated just like your normal Tuesday morning shift. It gets taxed at the standard rate. No change here.
  • 🔹 The "New" Money ($15): That extra $15 "half-time" premium? This is the tax-free part. The government allows you to deduct this specific amount from your income.
  • 🔹 The Double-Time Bonus: If you work holidays at 2.0x pay, the tax break gets massive. Since your base is 1.0x, the entire second 1.0x is premium pay. That means half your earnings for that day could be federally tax-free.

Do You Qualify?

This tax break is tied to labor laws. In plain English: if you are an hourly worker who gets time-and-a-half, you likely qualify. If you are a salaried manager, you probably don't.

✅ Who Wins Big?

  • Nurses & Healthcare: Hospitals run on overtime. If you are picking up extra 12-hour shifts or crisis pay, this is huge for you.
  • Police & Fire: Special details, holidays, and emergency response shifts often pay double time, which maximizes this benefit.
  • Trades & Construction: Electricians and lineworkers chasing storms or working seasonal crunch times will see a major difference in their refund.
  • Trucking & Logistics: If you are paid hourly and consistently running over 40 hours, you are the target audience for this No Tax on Overtime Calculator.

❌ Who is Left Out?

  • Salaried Managers: If you make $80k a year regardless of how many hours you work, this deduction doesn't apply to you.
  • 1099 Contractors: This one is tricky. Gig workers (DoorDash, Uber) are business owners, not employees. You don't get "overtime" legally, so you can't claim this deduction. (Check our 1099 Tax Calculator instead).

Real-Life Scenarios

Percentages are confusing. Let's look at real people to see how this plays out across different states.

👩‍⚕️ Sarah the Nurse (Texas)

Situation: Lives in Houston (No State Tax).
Pay: $50/hr Base. Works 10 hours OT/week.


Here's what that means for you: Sarah is in the perfect spot. Texas has no income tax, so she keeps 100% of the federal savings. Nothing gets clawed back.

Rough savings: ~$2,750 / year

⚡ Mike the Electrician (California)

Situation: Lives in LA (High State Tax).
Pay: $40/hr Base. Works 15 hours OT/week.


Here's what that means for you: Mike saves money on his federal return, but California likely won't play along. He will still owe about 9.3% state tax on that "tax-free" money.

Rough savings: ~$1,200 / year

🚛 John the Trucker (Ohio)

Situation: Lives in Ohio (State follows Feds).
Pay: $30/hr Base. Works 20 hours OT/week.


Here's what that means for you: Ohio usually does whatever the IRS does. So John gets a tax cut from Uncle Sam and the state of Ohio.

Rough savings: ~$3,100 / year

The State Tax Trap (Read This!)

Your address matters just as much as your hourly rate. The federal government can cut federal taxes, but they can't force states to follow suit. So states usually fall into three groups:

1. The "Follower" States (Best)

States like Colorado and Michigan have laws that say "we do whatever the IRS does." If the IRS says overtime is tax-free, these states automatically agree. You get double the savings without doing anything extra.

2. The "Stubborn" States (Worst)

States like California and New York often "decouple" from federal rules. They might say, "Cool, you don't owe federal tax, but you still owe us." Unless they pass a specific new law, you won't see state-level savings here.

3. The "Tax-Free" States (Easy)

Florida, Texas, Tennessee, etc. Since there is no state income tax on wages to begin with, you get the full federal benefit immediately.

💡 Pro Tip: Not sure about your state? You can double-check your state rules using the latest data from the Tax Foundation.

How to Protect Your Refund

Just because you qualify doesn't mean the money automatically lands in your pocket. There are a few traps to watch out for.

📉 Watch the Income Cap

The current drafts of the bill suggest a "phaseout" for high earners (likely around $150k for singles). If your intense overtime pushes you over that limit, you might start losing the deduction.

What to do: Lower your taxable income on paper. Putting more money into a Traditional 401(k) reduces your "official" salary, which might be enough to keep you under the limit and save your overtime tax break.

Get Your Money Now (Don't Wait)

Most people wait until April 2027 to get this money as a refund. That means you are giving the government an interest-free loan all year.

What to do: Adjust your W-4 form in January. If you know you'll save $3,000 in taxes, change your withholding so you get that extra ~$250 in your paycheck every month instead of waiting for a check next spring.

Why Trust This Calculator?

We know tax tools can be complicated. We built this tool because too many workers were guessing their savings using rough estimates. This calculator separates base pay and premium pay the same way payroll systems do, so you can see real numbers instead of hype.

  • Payroll-Grade Math: We didn't just guess. We built this using the exact formula professional payroll software uses.
  • State-Specific Logic: Most calculators ignore state taxes. Ours checks your specific state's laws to see if you get state savings or just federal.
  • Updated for 2026: We track the legislative drafts constantly. When the bill changes, we update the code.

Common Questions

Is my overtime 100% tax-free now?
No. Only the "Premium" part (the extra 0.5x or 1.0x pay) is free from federal income tax. You still pay Social Security, Medicare, and possibly state taxes on it.
Is this law officially passed?
Right now, this is still a proposal in the "Tax Cuts and Jobs Act" extension package. It has strong support, but it needs to pass Congress to be active for the 2026 tax year.
Does this hurt my Social Security?
Nope! The tax cut only applies to income tax. You still pay your full share of FICA (Social Security & Medicare) taxes, so your retirement benefits stay exactly the same.
What about bonuses and commissions?
Usually, no. Bonuses are considered "supplemental pay," not overtime. Unless your bonus is directly tied to overtime hours (like a shift differential), it will likely be taxed at the normal rate.
I work two jobs. Does that matter?
You can combine overtime from multiple jobs, but there is an annual cap on how much you can deduct (projected around $12,500). You'll reconcile all your W-2s when you file your return.
Disclaimer:

We are data nerds, not CPAs. This No Tax on Overtime Calculator is based on the 2026 legislative drafts and IRS definitions. Tax laws change fast, so always double-check with a professional before making big financial decisions.

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