Estimate the federal deduction for qualified overtime pay (tax years 2025–2028). Only the extra half-time premium counts, up to $12,500 or $25,000 for joint filers, reduced above $150,000 / $300,000 of modified AGI. See the deduction, the lower taxable income and your tax savings.
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Filing details
Your overtime
I know my
$/ hr
h
Hours over 40 in a workweek.
weeks
$
Full 1.5× overtime earnings for the year; one third of it is the qualified premium.
$
The half-time portion only. From 2026 your W-2 reports this amount separately.
Income
$
AGI including all overtime pay, plus any excluded foreign income.
$
Enter your values to see the result.
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How to use the No Tax on Overtime Calculator
Pick the tax year and filing status. Married couples must file jointly to get the deduction.
Choose how you will enter overtime: your hourly rate and overtime hours, your total time-and-a-half pay, or the premium shown on your pay stub or W-2.
Enter your modified AGI, including all of your overtime pay.
Leave the estimate box ticked or enter your own taxable income if you itemize.
Press Calculate deduction to see the deduction, tax saved and the what-if table.
How the overtime deduction is figured
Qualified premium = overtime hours × ½ × regular rate. With time-and-a-half pay this is the same as total overtime pay ÷ 3.
Tentative deduction = the smaller of the premium or the cap ($12,500, or $25,000 married filing jointly).
Phase-out = 10% × (modified AGI − $150,000), or − $300,000 if filing jointly.
Deduction = tentative deduction − phase-out, not below zero.
Example (2026, single): $28 an hour, 8 overtime hours a week for 48 weeks. Total overtime pay is 384 h × $42 = $16,128, of which the premium is 384 h × $14 = $5,376. With $78,000 of MAGI there is no phase-out, so the deduction is the full $5,376. Taxable income falls from $61,900 to $56,524, and at the 22% rate that saves about $1,183.
Overtime deduction rules (2025–2028)
Rule
Single / head of household
Married filing jointly
Maximum deduction
$12,500
$25,000
Phase-out starts (MAGI)
$150,000
$300,000
Reduction
$100 per $1,000 over the threshold (10%)
Full cap gone at
$275,000
$550,000
Married filing separately
Not allowed
What counts
FLSA-required premium only (the "half" of time-and-a-half)
Premium versus total overtime pay
Regular rate
OT pay per hour (1.5×)
Qualified premium per hour
Premium for 100 OT hours
$18
$27
$9
$900
$25
$37.50
$12.50
$1,250
$35
$52.50
$17.50
$1,750
$50
$75
$25
$2,500
If you are paid double time, only the half-time premium that federal law requires counts; the extra half of double time does not. Keep pay stubs that show overtime hours and rates, especially for 2025 when W-2s may not list the premium separately.
Frequently asked questions
What overtime counts for the deduction?
Only qualified overtime compensation: the premium portion of overtime that the Fair Labor Standards Act requires, which is the extra half of time-and-a-half for hours over 40 in a workweek. The regular-rate part of each overtime hour stays taxable, and overtime paid only because of a union contract, state law or a generous employer policy (such as daily overtime or double time) does not add to the qualified amount.
How much is the overtime deduction?
Up to $12,500 per year, or $25,000 on a joint return, for tax years 2025 through 2028. It is reduced by $100 for each $1,000 of modified AGI above $150,000 ($300,000 joint), which is 10% of the excess.
How do I find my qualified overtime premium?
If you earn time and a half, divide your total overtime pay by 3, or multiply your overtime hours by half your regular hourly rate. Starting with 2026, employers must report qualified overtime separately on Form W-2. For 2025 the IRS allows a reasonable estimate from pay stubs or employer statements.
Do I still pay Social Security and Medicare on overtime?
Yes. The deduction only reduces federal income tax. FICA (7.65% for employees) is still withheld from all overtime pay, and state income tax depends on your state's rules.
Can salaried or self-employed workers claim it?
Generally no. Exempt salaried employees and independent contractors are not owed FLSA overtime, so they have no qualified overtime premium. Non-exempt employees paid hourly or salaried non-exempt employees who receive FLSA overtime can claim it.
Do I need to itemize to get the overtime deduction?
No. It is claimed on Schedule 1-A and is subtracted from income after AGI, so you get it with either the standard deduction or itemized deductions. You need a valid Social Security number, and married couples must file a joint return.
How much will I save?
About the deduction times your marginal rate. A worker earning $28 an hour with 8 overtime hours a week for 48 weeks has a $5,376 premium; in the 12% bracket that saves about $645, and in the 22% bracket about $1,183. The calculator runs the actual brackets so the answer is exact for the federal part.
Are all the tools on FreeToolCabin tested for quality and accuracy?
Yes! Every tool on our site undergoes automated Q/A testing in real browser environments to ensure high precision, correct output, and zero errors. If you happen to spot a bug or have a suggestion, please contact us at [email protected] and our team will review it right away.