No Tax on Overtime Calculator
The 2025 law created a federal deduction for overtime — but only for the premium half, only on your return, and it never touches Social Security or Medicare. This calculator gives you the real number, not the headline.
No Tax on Overtime Calculator
What the new federal overtime deduction actually saves you — and what it does not.
Federal tax saved: $1,183. FICA still owed on that overtime: $1,234.
- Overtime pay for the year (gross)
- $16,128
- Qualifying premium (the half of time-and-a-half)
- $5,376
- Deduction applied (Schedule 1-A)
- $5,376
- Federal tax without the deduction
- $7,531
- Federal tax with the deduction
- $6,348
- Take-home for the year
- $62,331
Estimates only. Not tax or legal advice. Consult a professional. Models FLSA time-and-a-half: the deductible premium is half your regular rate per overtime hour, capped and phased out per Schedule 1-A.
One worker, step by step
A single filer earning $28 an hour who works 8 overtime hours a week for 48 weeks of the year, in a state with no income tax.
Regular pay is $58,240 a year. Overtime runs at $42 an hour, which adds $16,128 of overtime pay, for a gross of $74,368.
Time-and-a-half is one hour of straight time plus a half-time premium. Only that premium is deductible: $5,376 — one third of the overtime pay, well under the $12,500 cap.
Federal tax drops from $7,531 to $6,348 — $1,183 back at filing time.
That same overtime paid $1,234 in Social Security and Medicare — more than the $1,183 of income tax the new deduction removes. The premium is deductible from federal income tax and nothing else.
What counts as qualified overtime
At a $20 base rate, time-and-a-half pays $30 an hour: $20 of straight time plus a $10 premium. The $10 is what the deduction covers. On double time the premium stays $10 — half the regular rate — even though the hour pays $40.
The statute points at overtime required by the Fair Labor Standards Act — hours past 40 in a week. Premium pay that exists only because of a state rule or your contract (daily overtime, weekend differentials, contractual bonuses for a sixth day) sits outside those words.
Up to $12,500 of premium a year, or $25,000 for a married couple filing jointly. Married taxpayers filing separately cannot claim it at all.
Your employer separates the qualified premium and reports it in W-2 box 12 under code TT. You need a Social Security number on the return, and the premium has to be traceable to that reporting.
The income phase-out
Above $150,000 of modified adjusted gross income ($300,000 filing jointly), the deduction drops $100 for every full $1,000 over the line. Partial thousands round down, so $160,999 counts the same as $160,000.
A single filer at $160,000 of income is $10,000 over the threshold — ten full thousands, so $1,000 comes off. A maxed $12,500 premium deducts $11,500 instead.
What the deduction does not do
Four things people expect from the phrase “no tax on overtime” that the law does not deliver.
Social Security (6.2%) and Medicare (1.45%) apply to overtime exactly as before — 7.65% of every overtime dollar, withheld from the check whatever the deduction does later.
This is a federal deduction. Unless your state passed its own version, state income tax applies to the full overtime check — pick your state in the calculator to see it.
Nothing changes in your paycheck by itself. The money shows up when you file, as a smaller tax bill — unless you deliberately lower withholding on a new W-4.
The provision covers tax years 2025 through 2028. It also cannot push taxable income below zero, so a low earner may save less than the headline rate suggests.
How you claim it — and what we checked
The deduction lives on Schedule 1-A and is available whether you itemize or take the standard deduction — you do not have to give up the standard deduction to claim it. Start from the box 12 code TT figure on your W-2.
IRS Tax Tip 2026-06 and the IRS qualified-overtime FAQ for the premium-only rule, the caps and the phase-out mechanics; IRS Rev. Proc. 2025-32 for the 2026 brackets and standard deduction; the SSA October 2025 release for the Social Security wage base.
Keep going
If you also earn tips, the no tax on tips calculator applies the other Schedule 1-A deduction, with its own $25,000 cap. For overtime pay itself — time-and-a-half, double time, what an overtime hour is worth after tax — use the overtime calculator. And if you work for yourself, the 1099 calculator covers self-employment tax, where there is no premium to deduct.
No tax on overtime — FAQ
Is overtime really tax-free now?
How much does the no-tax-on-overtime deduction actually save me?
Will I see more money in my paycheck each week?
What is code TT in box 12 of my W-2?
Does double time qualify the same way?
Free PDF: 10 tax hacks for people who work the hours
What actually moves your take-home when overtime is part of the job. Bilingual EN/ES.
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