What is the deduction actually worth at $18, $25, $35, or $50 an hour? Worked examples with real arithmetic — including the caps, the phase-out, and the double-time twist.
For steady weekly overtime, qualified overtime compensation = overtime hours per week × your regular rate × 0.5 × 52 weeks. The tax saved is the deductible amount × your marginal federal bracket. If your overtime pay is shown as a single time-and-a-half figure, divide it by 3 — the premium is one third of time-and-a-half pay. For double-time pay, divide by 4, because the premium is one quarter of double-time pay. Every example below assumes single filing with MAGI under $150,000, so no cap or phase-out applies unless the example says so.
Each cell is the year's qualified overtime compensation — the deductible amount before any cap or phase-out.
| Hourly rate | 5 OT hrs/week | 10 OT hrs/week | 15 OT hrs/week |
|---|---|---|---|
| $18 | $2,340 | $4,680 | $7,020 |
| $25 | $3,250 | $6,500 | $9,750 |
| $30 | $3,900 | $7,800 | $11,700 |
| $35 | $4,550 | $9,100 | $13,650* |
| $50 | $6,500 | $13,000* | $19,500* |
* Exceeds the $12,500 single cap — the deductible amount is $12,500, not the figure shown.
The deduction is worth its amount times your marginal bracket. At 22%:
| Hourly rate | 5 OT hrs/week | 10 OT hrs/week | 15 OT hrs/week |
|---|---|---|---|
| $18 | $515 | $1,030 | $1,544 |
| $25 | $715 | $1,430 | $2,145 |
| $30 | $858 | $1,716 | $2,574 |
| $35 | $1,001 | $2,002 | $2,750* |
| $50 | $1,430 | $2,750* | $2,750* |
* Capped at the $12,500 deduction × 22% = $2,750. Figures rounded to the nearest dollar.
Read the table two ways. First, hours matter as much as rate: a $25/hour worker with 15 overtime hours a week saves more ($2,145) than a $35/hour worker with 5 ($1,001). Second, the cap bites early at high rates: a $50/hour worker hits the single cap with just 10 overtime hours a week, and extra hours add nothing to the deduction — though they still add pay.
Take the $25/hour worker with 10 overtime hours a week: $6,500 of qualified overtime. What it saves depends entirely on the marginal bracket it offsets:
| Marginal bracket | Tax saved on $6,500 |
|---|---|
| 10% | $650 |
| 12% | $780 |
| 22% | $1,430 |
| 24% | $1,560 |
| 32% | $2,080 |
That is why two workers with identical overtime can save very different amounts, and why a deduction is not a credit: it saves tax at your marginal rate, not dollar for dollar.
$30/hour, 10 overtime hours a week, but only for 26 weeks of the year: qualified = 0.5 × $30 × 10 × 26 = $3,900. Overtime you did not work does not count — the formula uses actual hours, not a full-year assumption.
$35/hour, 15 overtime hours a week, all year: qualified = 0.5 × $35 × 15 × 52 = $13,650, but the single cap is $12,500, so the deduction is $12,500. At 24%, the saving is $3,000.
Two spouses with $10,000 of qualified overtime each: combined $20,000, under the $25,000 joint cap, so the full $20,000 is deductible — $4,400 saved at 22%. But two spouses with $15,000 each reach $30,000 combined, and only $25,000 is deductible, because the cap is per return, not per spouse.
Single filer, $6,500 of qualified overtime, MAGI $160,000. The excess over $150,000 is $10,000, or 10 whole thousands, so the reduction is 10 × $100 = $1,000 and the deduction is $5,500. At 22%, the saving is $1,210 instead of $1,430.
$25/hour, 5 double-time hours a week, all year. Only the 0.5× premium counts per hour: 0.5 × $25 × 5 × 52 = $3,250. Double time does not double the deduction — the premium per hour is the same $12.50 as a time-and-a-half hour at the same rate.
Not everyone works the same overtime every week. The formula still works — just add up the year's overtime hours first, then multiply once. Suppose you worked 8 overtime hours a week for 20 weeks and 12 a week for 10 weeks: that is 160 + 120 = 280 overtime hours for the year. At $28/hour, the premium is 0.5 × $28 = $14 per hour, so qualified overtime is 280 × $14 = $3,920. If your rate changed mid-year, split the year at the change and compute each part separately — the premium follows the rate in effect when the hours were worked, not the rate at year-end.
Your marginal federal bracket — the rate on your last dollar of taxable income. A deduction saves tax at that rate, not at your average rate.
Only the dollars above a bracket threshold are taxed at the higher rate. Earning more overtime never makes you worse off through brackets alone — and the deduction itself lowers taxable income.
Yes. The deduction is based on the overtime you actually worked. Use your real hours, not a full-year assumption.
Different marginal brackets, different filing statuses, or different MAGI phase-outs. The deductible amount may be identical while the tax saved differs.
Run your own numbers with the deduction calculator — it applies the premium rule, caps, and phase-out for any rate and hours.