No Tax on Overtime Calculator
The One, Big, Beautiful Bill Act lets non-exempt workers deduct the premium portion of overtime pay from federal taxes. Enter your hourly rate and weekly hours to see your savings.
- Regular pay (40 hrs × $25.00 × 52 wks)
- $52,000
- Overtime hours per week
- 10 hrs
- OT total pay (10 hrs × $37.50 × 52 wks)
- $19,500
- OT premium — the deductible "half" (10 hrs × $12.50 × 52 wks)
- $6,500
Only the premium portion of overtime pay (the "half" of time-and-a-half) qualifies for the deduction — not the base hourly rate during overtime hours.
annual savings ($107/month)
- Annual OT premium
- $6,500
- After $12,500 cap
- $6,500
- Deductible amount
- $6,500
9.65%
Before
7.86%
After OBBBA
- ✓You are a non-exempt employee under the Fair Labor Standards Act (FLSA) — eligible for overtime pay
- ✓Your overtime compensation is reported on your W-2 or 1099
- ✓Only the premium portion (the "half" of time-and-a-half) qualifies — not the base rate during OT hours
This deduction applies to federal income tax only — it does not reduce FICA taxes. Available starting tax year 2026.
How the OBBBA Overtime Deduction Works
Premium Only
Only the "half" of time-and-a-half is deductible. If you earn $30/hr OT on a $20/hr base, only the $10 premium qualifies.
Deduction Cap
$12,500 for single filers, $25,000 for married filing jointly. Phases out above $150K/$300K MAGI.
FLSA Non-Exempt
You must be legally entitled to overtime under the Fair Labor Standards Act. Exempt salaried workers don't qualify.
Starting Tax Year 2026
Unlike tips (which start 2025), the overtime deduction begins with 2026 tax returns. Your W-2 will separately report qualified OT pay.
Frequently asked questions
What part of overtime pay is deductible?
Only the premium portion — the "half" of time-and-a-half. If your regular rate is $20/hr, overtime pays $30/hr, and only the $10/hr premium is deductible.
What is the overtime deduction cap?
$12,500 per year for single filers, $25,000 for married filing jointly. It phases out above $150K (single) or $300K (MFJ) MAGI.
Do I need to be hourly to qualify?
You must be FLSA non-exempt — legally entitled to overtime pay for hours beyond 40/week. Exempt salaried employees don't qualify.
When does the overtime deduction start?
Tax year 2026. Your employer's W-2 will separately report qualified overtime compensation starting that year.