No Tax On Overtime Calculator

What The Overtime Deduction Is

The deduction lets you subtract part of your overtime pay from your income before federal income tax. It applies for tax years 2025 to 2028. The most you can deduct is $12,500, or $25,000 on a joint return.

It is a deduction, not an exemption. The deduction only lowers the income that federal income tax is figured on.

A federal income tax deduction for qualified overtime pay, up to $12,500 ($25,000 on a joint return), for tax years 2025 to 2028. It is a deduction from income for federal income tax. Source: IRS, No Tax on Overtime deduction. Checked November 2026. An estimate, not payroll, tax or legal advice.

Only The Premium Counts

The deduction does not cover all of your overtime pay. It covers the extra you are paid above your regular rate, which is called the premium. For time and a half, the premium is the half. That is one third of the total overtime pay.

Here is the fixture. You work 200 overtime hours at a regular rate of $30.00. At time and a half you are paid $9,000.00. The premium is 200 × $15.00 = $3,000.00, which equals $3,000.00 when worked out from the total pay.

Pay at your regular rate for those hours is not part of the deduction. You would have been paid that much for regular hours too.

Only the overtime premium counts, which is the pay above the regular rate. For time and a half, that is the half. Only overtime required by the federal wage law (FLSA) qualifies, so extra daily overtime that a state requires does not. Source: IRS, questions and answers on qualified overtime. Checked November 2026. An estimate, not payroll, tax or legal advice.

Premium By Hours And Rate

This table shows the qualified premium at time and a half. It is hours times half of your regular rate.

Before the cap and the income limit.

The Cap And The Income Limit

The deduction is reduced when your modified adjusted gross income, called MAGI, is high. It starts to drop above $150,000 for a single filer, or $300,000 for a joint return. It falls by $100 for each full $1,000 over.

The table shows a single filer with a $12,500.00 premium. At the income limit the whole amount is allowed. Higher income takes it down step by step, and it reaches zero when the reduction is as large as the amount.

Joint filers use the higher limit.

The deduction is reduced by $100 for each full $1,000 that modified adjusted gross income is over $150,000 ($300,000 on a joint return). Source: IRS, No Tax on Overtime deduction. Checked November 2026. An estimate, not payroll, tax or legal advice.

Which Overtime Qualifies

Only overtime that the federal wage law requires qualifies. Some states pay overtime for hours a day beyond the federal rule, and that extra does not count. Take four 12 hour days in a week with a 30 minute break. That is 8 h of federal overtime, which has a premium of $80.00 at $20.00 an hour.

Under California rules the same week has 16 h of overtime. The calculator uses the federal figure of 8 h for the deduction and leaves the rest out, whichever rule your job uses.

Use Your Time Card

If you keep your time card here, the Use my saved hours button works out your federal overtime premium for the tax year you choose. It reads from your own device and sends nothing out.

It counts overtime per workweek, as the federal rule does, and leaves state daily overtime out. Check the result against your pay records before you rely on it.

Start recording hours in the overtime calculator.

Estimate The Tax You Could Save

Pick your tax bracket to see a rough tax saving. The saving is the deduction times your bracket rate. A $3,000.00 deduction at 22% lowers federal income tax by about $660.00.

This is a guide only. Your bracket depends on your whole income, and other credits and deductions change the result.

What To Check Before You Rely On It

This page gives an estimate of a federal deduction, not tax advice. Your W-2 or employer statement shows the official amount.

1. Look at your W-2 or employer statement, which shows the official qualified amount.
2. Compare it with this estimate. Differences are common, because employers work out the premium from their own payroll records.
3. Read the IRS guidance for the tax year you are filing.
4. Ask a tax professional if your situation is not simple.

Questions People Ask