No Tax on Overtime Calculator

The 2025–2028 federal deduction for overtime is real — but narrower than the slogan. Only the premium half of FLSA overtime counts. This calculator works out your qualified amount, applies the caps and the income phase-out, and estimates your tax saved.

Estimate your deduction

Tax years 2025–2028 · IRC §225 · Rules per IRS Notice 2025-69

hrs
$/hr
$
Estimated deduction$4,500.00
Qualified overtime premium$4,500.00
Your annual cap$12,500.00
After cap$4,500.00
Phase-out reduction$0.00
Estimated federal tax saved$990.00

Estimate only — not tax advice. Married filing separately cannot claim this deduction. A valid SSN is required, and married couples must file jointly.

The rules, in plain English

The "no tax on overtime" provision (Internal Revenue Code §225, created by the One Big Beautiful Bill Act) is a deduction, not an exemption — your overtime is still paid and taxed as normal during the year, and you claim the benefit when you file.

Worked example

A warehouse worker earns $30/hour and works 300 FLSA overtime hours in the year.

StepMathAmount
Total overtime pay received300 × $45$13,500
Qualified premium (the "half")300 × $30 × 0.5$4,500
Deduction (under the $12,500 cap)—$4,500
Tax saved at the 22% bracket$4,500 × 22%$990

Notice the gap most people miss: $13,500 of overtime pay produces a $4,500 deduction — not $13,500. Expecting the full amount is the most common error with this deduction.

How to claim it

  1. 2025: employers were not required to show qualified overtime on your W-2. Add it up from your pay stubs — count only FLSA (over-40 weekly) overtime premium. IRS Notice 2025-69 explains acceptable methods.
  2. 2026 onwards: employers must report qualified overtime separately, so the figure will be on your tax forms.
  3. Enter the amount on Schedule 1-A (Form 1040), which applies the cap and phase-out automatically.
  4. File jointly if married — married filing separately makes you ineligible.
Watch out: Double-time hours don't double the deduction. If you're paid 2× for an hour, only the first 0.5× premium counts — exactly the same qualified amount as a time-and-a-half hour.

Frequently asked questions

What part of overtime pay is tax deductible?

Only the premium portion required by the FLSA — the extra "half" in time-and-a-half. Earn $30/hour, work an overtime hour, get paid $45: only $15 of it is qualified overtime compensation.

What are the deduction limits?

Up to $12,500 of qualified overtime per year, or $25,000 married filing jointly, for tax years 2025–2028. The deduction falls by $100 per $1,000 of MAGI above $150,000 ($300,000 joint).

Does overtime from state law or a union contract qualify?

Generally no — only overtime the FLSA itself requires (over 40 hours in a workweek). State, contract, or voluntary premium pay doesn't qualify on its own.

How do I claim it?

On Schedule 1-A (Form 1040). For 2025, compute it from your own pay records using IRS Notice 2025-69; from 2026, employers must report qualified overtime on your tax forms.

Does it remove Social Security and Medicare tax?

No — it's an income-tax deduction only. FICA taxes apply to overtime wages in full.

Need the pay itself first? Use the overtime calculator for a full weekly breakdown, or the overtime pay calculator for biweekly, monthly and annual totals.