No Tax on Overtime Calculator 2026

Enter your regular hourly rate — this is your standard pay for the first 40 hours per week. The calculator uses this to determine the overtime premium (0.5x your regular rate).

Enter your overtime hours per week. This is the average number of hours you work beyond 40 each week that qualify as FLSA overtime. Only federal overtime (hours over 40/week for non-exempt employees) counts for the deduction.

Enter the weeks of overtime per year you typically work. Most workers do not work overtime every week of the year — account for vacations, holidays, and slow periods. A common estimate is 46-50 weeks.

Enter your other annual income, which includes your base pay at 40 hours/week plus any non-overtime income (bonuses, investment income, side income). This is used to calculate your total MAGI and determine your tax bracket and phase-out status.

Select your filing status. This determines the deduction cap ($12,500 for single, $25,000 for married filing jointly) and the MAGI phase-out threshold ($150K single, $300K MFJ).

Optionally enter your state income tax rate to see the total state tax still owed on overtime, since the federal deduction does not affect state taxes. Enter 0% if you live in a state with no income tax (Texas, Florida, Nevada, etc.).

The No Tax on Overtime Calculator estimates your federal income tax savings under the One Big Beautiful Bill Act (OBBBA) qualified overtime deduction, signed into law on July 4, 2025. This provision allows non-exempt workers who receive FLSA overtime pay to deduct up to $12,500 in overtime premium pay from their federal income tax ($25,000 for married filing jointly). The deduction is effective for tax years 2025 through 2028.

Approximately 33 million American workers regularly earn overtime pay in industries including construction, manufacturing, healthcare, transportation, retail, and hospitality. Under prior law, every dollar of overtime was taxed at the worker's marginal federal income tax rate, often pushing total earnings into a higher bracket. The OBBBA changes this by creating an above-the-line deduction specifically for the overtime premium — the extra 0.5x above regular pay that constitutes the time-and-a-half bonus.

The distinction between overtime pay and overtime premium is critical. If you earn $30/hour and work 10 overtime hours, your overtime pay is $450 (10 x $45), but the overtime premium — the only portion eligible for the deduction — is $150 (10 x $15). The calculator automatically computes this premium based on your regular hourly rate and overtime hours.

A construction worker earning $35/hour who works 10 hours of overtime per week for 48 weeks generates $8,400 in annual overtime premium. In the 22% federal tax bracket, that translates to approximately $1,848 in annual tax savings. A nurse at $40/hour with 8 hours of weekly overtime saves roughly $1,690 per year. These savings go directly to workers as increased take-home pay.

Important limitations: The deduction covers only federal income tax. Payroll taxes (Social Security 6.2% + Medicare 1.45% = 7.65%) and state income taxes still apply to all overtime pay. Only FLSA-qualifying overtime counts — salaried exempt employees, independent contractors, and gig workers are not eligible. The deduction phases out for higher earners above $150,000 MAGI (single) or $300,000 MAGI (married filing jointly).

The qualified overtime deduction is calculated as follows:

Step 1: Calculate the overtime premium

Overtime Premium Rate = Regular Hourly Rate × 0.5

Annual Overtime Premium = Overtime Premium Rate × Weekly OT Hours × Weeks Per Year

Step 2: Determine the deduction limit

Deduction Limit = $12,500 (Single, MFS, HoH) or $25,000 (Married Filing Jointly)

Step 3: Calculate MAGI and apply phase-out

MAGI = Other Income + Total Overtime Pay (full 1.5x)

If MAGI exceeds the phase-out threshold:

Reduction = floor((MAGI − Threshold) / $1,000) × $100

Adjusted Limit = max(0, Deduction Limit − Reduction)

Step 4: Qualified overtime deduction

Qualified Deduction = min(Annual Overtime Premium, Adjusted Limit)

Step 5: Federal tax savings

Federal Savings = Qualified Deduction × Marginal Tax Rate

The following table summarizes the deduction limits and phase-out thresholds:

Example 1 — Construction Worker (Single): A construction worker earns $35/hour and works 10 hours of overtime per week for 48 weeks. Base pay: $35 × 40 × 52 = $72,800. Overtime premium rate: $35 × 0.5 = $17.50. Annual overtime premium: $17.50 × 10 × 48 = $8,400. Total overtime pay: $35 × 1.5 × 10 × 48 = $25,200. MAGI: $72,800 + $25,200 = $98,000. Filing single, deduction limit is $12,500. Since MAGI is below $150,000, no phase-out. Qualified deduction: $8,400 (full premium, under cap). At the 22% bracket: $8,400 × 22% = $1,848 savings per year ($154/month). Payroll tax still owed on overtime: $25,200 × 7.65% = $1,928.

Example 2 — Nurse (Married Filing Jointly): A nurse earns $42/hour and works 8 hours of overtime per week for 50 weeks. Base pay: $42 × 40 × 52 = $87,360. Overtime premium: $42 × 0.5 × 8 × 50 = $8,400. Total overtime pay: $42 × 1.5 × 8 × 50 = $25,200. Spouse earns $50,000. Household MAGI: $87,360 + $25,200 + $50,000 = $162,560. Deduction limit is $25,000 (MFJ). No phase-out (below $300K). Qualified deduction: $8,400. At the 22% bracket: $8,400 × 22% = $1,848 savings per year ($154/month).

Example 3 — Warehouse Worker (Single): A warehouse worker earns $20/hour and works 15 hours of overtime per week for 50 weeks. Overtime premium: $20 × 0.5 × 15 × 50 = $7,500. Total overtime pay: $20 × 1.5 × 15 × 50 = $22,500. Base pay: $20 × 40 × 52 = $41,600. MAGI: $41,600 + $22,500 = $64,100. Filing single, 22% bracket. Qualified deduction: $7,500. Savings: $7,500 × 22% = $1,650 per year ($137.50/month).

Example 4 — High-Income Electrician (Single, Phase-Out): A master electrician earns $55/hour and works 12 hours of overtime per week for 50 weeks. Overtime premium: $55 × 0.5 × 12 × 50 = $16,500. Total overtime pay: $55 × 1.5 × 12 × 50 = $49,500. Base pay: $55 × 40 × 52 = $114,400. MAGI: $114,400 + $49,500 = $163,900. MAGI exceeds $150K by $13,900. Reduction: floor(13,900 / 1,000) × $100 = $1,300. Adjusted limit: $12,500 − $1,300 = $11,200. Qualified deduction: $11,200 (capped below premium). At the 24% bracket: $11,200 × 24% = $2,688 per year ($224/month). Without phase-out, savings would have been $3,000.