No Tax on Overtime Calculator (2026)
See your time-and-a-half overtime pay and how much the new overtime deduction saves you. At $25/hour with 10 hours of overtime a week, you keep an extra $1,280 a year in federal tax.
| Your pay | Per year |
|---|---|
| Regular pay | $52,000 |
| Overtime pay (1.5×) | $19,500 |
| Tips | $0 |
| Total income | $71,500 |
| Deductible tips | $0 |
| Deductible overtime (the “half”) | $6,500 |
| Before | With deduction | |
|---|---|---|
| Federal income tax | $6,900 | $5,620 |
| Social Security + Medicare | $5,470 | $5,470 |
| State & local | $0 | $0 |
| Take-home / year | $59,130 | $60,410 |
| Take-home / month | $4,928 | $5,034 |
Federal income tax only. Social Security and Medicare still apply to tips and overtime, and state income tax is calculated without the deduction. Tax years 2025-2028.
How no tax on overtime works
- Only the premium is deductible: the extra half-rate you earn on hours over 40, not the whole overtime paycheck.
- Annual cap: $12,500 per person, $25,000 for married couples filing jointly (2025-2028).
- Income limit: reduced by $100 per $1,000 of income over $150,000 ($300,000 joint).
- Federal income tax only. Social Security, Medicare, and most state taxes still apply.
Yearly tax savings by wage and overtime hours
Texas, single filer, 40 regular hours a week, 52 weeks, 2026. Each cell shows federal tax saved per year.
| Hourly wage | 5 OT hrs/week | 10 OT hrs/week | 15 OT hrs/week |
|---|---|---|---|
| $18/hour | $281 | $562 | $842 |
| $22/hour | $343 | $686 | $1,530 |
| $25/hour | $390 | $1,280 | $2,145 |
| $30/hour | $858 | $1,716 | $2,574 |
| $35/hour | $1,001 | $2,002 | $2,750 |
| $40/hour | $1,144 | $2,288 | $2,914 |
Savings level off once the overtime premium reaches the $12,500 cap.
Frequently asked questions
How much overtime is tax-free?
Only the premium part of overtime (the “half” in time-and-a-half) is deductible, up to $12,500 a year ($25,000 for married couples filing jointly), for 2025 through 2028. Your regular hourly rate for overtime hours is still taxed normally.
How much will no tax on overtime save me?
A worker earning $25 an hour with 10 hours of overtime a week earns $19,500 in overtime pay, of which $6,500 is deductible. That saves about $1,280 in federal income tax a year, or $49 per bi-weekly paycheck.
How is overtime pay calculated?
Under the Fair Labor Standards Act, non-exempt employees earn at least 1.5 times their regular rate for hours over 40 in a workweek. At $25 an hour, each overtime hour pays $37.50: $25 of regular pay plus a $12.50 premium.
Does all overtime qualify?
No. Only overtime required by the federal FLSA (hours over 40 in a week for non-exempt workers) qualifies. Overtime paid only because of state law (such as California daily overtime), a union contract, or employer policy beyond the FLSA requirement does not count, and salaried exempt employees generally don’t qualify.
Do I still pay Social Security and Medicare on overtime?
Yes. The deduction reduces federal income tax only. FICA and, in most states, state income tax still apply to all overtime pay.
Is there an income limit?
Yes. The deduction is reduced by $100 for every $1,000 of modified adjusted gross income above $150,000 ($300,000 married filing jointly), so it phases out completely around $275,000 for single filers. Married couples must file jointly to claim it, and you need a valid Social Security number.
How do I see the savings in my paycheck?
Submit a new 2026 Form W-4 and include your expected qualified overtime on the Step 4(b) Deductions Worksheet. Your employer will withhold less federal tax during the year; otherwise the savings come back as a refund.
Want the savings in each paycheck instead of at tax time? Here's how to fill out the 2026 W-4.
Related calculators
Source: IRS: What to know about the no tax on overtime deduction.