No tax on overtime calculator.

Yes, this calculator models the deduction created by the One Big Beautiful Bill Act, the tax law President Trump signed on July 4, 2025 after campaigning on "no tax on overtime." The White House proposal became a capped, temporary deduction under Internal Revenue Code section 225 rather than a full exemption, and this tool applies the version that was actually enacted.

No. The IRS publishes the rules, a Q&A fact sheet, and the Schedule 1-A form, but it does not offer a calculator that works out your deduction from your hourly rate or pay stubs. This free calculator fills that gap by following the same IRS worksheet, and every figure it uses is cited from IRS sources.

The TurboTax widget reports a qualified overtime figure but has no income field, so it cannot apply the MAGI phase-out and never shows the dollars you save. This calculator asks for income, applies the phase-out exactly as Schedule 1-A line 19 does, converts your deduction into estimated federal tax saved at your bracket, and shows the full line-by-line worksheet behind the number.

Take your total time-and-a-half pay for the year and divide it by 3 (divide double-time pay by 4). Cap the result at $12,500, or $25,000 on a joint return. Then subtract $100 for every full $1,000 your modified adjusted gross income exceeds $150,000 ($300,000 joint). What remains is your deduction. Multiply it by your federal tax bracket to figure your savings. Full worked walkthrough.

Your refund grows by roughly your deduction multiplied by your marginal tax rate. A $5,000 deduction is worth about $600 at the 12% bracket, $1,100 at 22%, or $1,200 at 24%. It is a refund increase rather than a bigger paycheck because 2025 withholding tables were never updated for this deduction, so the tax you already paid comes back when you file.

The deduction is federal, so workers in every state can claim it. What changes is the state side: Texas and Florida have no state income tax, so overtime is untouched there either way. Pennsylvania taxes overtime under its flat rate and California taxes it at rates up to 13.3%, and neither state recognises the federal deduction. See all 50 states.

It is a federal income tax deduction, not a full exemption. For tax years 2025 through 2028, you can deduct the premium portion of your federal-law overtime pay (the extra "half" in time-and-a-half) up to $12,500 ($25,000 on a joint return). Taxes are still withheld from your paychecks; the benefit shows up when you file your return on Schedule 1-A.

Only the overtime premium, the extra 0.5× above your regular rate. If you earn $20/hour and get $30/hour for overtime, only the $10 premium per hour is deductible. Quick shortcut from a pay stub: total time-and-a-half pay ÷ 3.

Up to $12,500 per year for single filers and heads of household, or $25,000 on a joint return. The cap is per tax return, not per person, and it is the same for every year from 2025 through 2028 (it is not inflation-adjusted). For qualifying surviving spouses the IRS has not yet clarified which cap applies, our calculator conservatively uses $12,500.

Yes. The deduction shrinks by $100 for every full $1,000 of modified adjusted gross income (MAGI) above $150,000 ($300,000 on a joint return). At the maximum deduction, it reaches zero at $275,000 single / $550,000 joint. MAGI includes your overtime pay.

Yes. The 7.65% employee share of FICA (Social Security + Medicare) still comes out of every overtime dollar. This deduction only reduces your federal income tax. "No tax on overtime" is a nickname, not a literal description.

For 2025, IRS withholding tables were not changed, so paychecks stayed the same all year and the benefit arrives as a bigger refund (or smaller balance due) at filing. From 2026, you can update Form W-4 (Step 4(b)) to reduce withholding during the year, otherwise you still get it at filing.

Only if they are non-exempt under the Fair Labor Standards Act and actually receive FLSA-required overtime. Exempt salaried employees (most managers, professionals, and administrators paid on a salary basis above the exemption threshold) receive no FLSA overtime, so nothing qualifies.

Generally no. Independent contractors are not entitled to FLSA overtime, so they have no qualified overtime compensation. A rare exception exists for workers who are non-employees for tax purposes but legally employees under the FLSA. IRS Notice 2025-69 calls this "possible (but not common)".

Yes. This deduction is available whether or not you itemize. It stacks on top of your standard deduction and reduces taxable income (it does not reduce AGI).

File Schedule 1-A (Additional Deductions) with your Form 1040, 1040-SR, or 1040-NR. Part III walks through the overtime deduction: enter your qualified overtime, apply the cap, apply the income phase-out, and carry the result to Form 1040. A valid Social Security number is required, and married taxpayers must file jointly.

For 2025, employers were not required to update W-2s, look for box 14 or a separate statement, or compute it yourself (total time-and-a-half pay ÷ 3 is an IRS-approved method). From tax year 2026, employers must report it on the W-2 (box 12, code TT, per IRS reporting guidance).

Only partially. Federal law requires only time-and-a-half, so even when you are paid 2×, only the 0.5× slice above your regular rate is qualified, the IRS shortcut is total double-time pay ÷ 4. The extra pay above 1.5× never qualifies.

Not for the federal deduction. Only overtime required by federal law (over 40 hours in a workweek) qualifies. California's daily overtime (over 8 hours in a day within an under-40-hour week) is required by state law, not the FLSA, so it does not qualify. See the California guide.

No. The law explicitly requires married taxpayers to file jointly to claim this deduction (IRC §225(e)). Married filing separately returns get $0.

Yes, if they are FLSA non-exempt and receive FLSA-required overtime. Special federal overtime schedules still count: police and fire under 29 USC 207(k) work periods, hospital workers under 8-and-80 agreements (207(j)), and public-sector comp time cashed out as wages (207(o), counted in the year paid).

No, that is a myth. Overtime is taxed at the same rates as regular wages. Bigger paychecks can trigger more withholding up front, which is why overtime checks feel more heavily taxed, but it evens out on your return. Full explanation.

Yes. "No tax on tips" (up to $25,000) and "no tax on overtime" ($12,500/$25,000) are separate deductions with separate caps, both claimed on Schedule 1-A for 2025-2028. A tipped worker with qualifying overtime can claim both, but the same dollars can't count as both a tip and overtime.

It applies to tax years 2025 through 2028 and expires after 2028 unless Congress extends it. It took effect retroactively to January 1, 2025 when the One Big Beautiful Bill Act was signed on July 4, 2025.

No. It reduces taxable income, not adjusted gross income. AGI-based items (IRA limits, ACA premium credits, EITC, even this deduction's own MAGI phase-out) are calculated as if the deduction didn't exist.

Usually yes. The deduction sits below AGI on the federal return, so most states (which start from federal AGI) never see it. A minority of states that start from federal taxable income may inherit it. Check your state.