No Tax on Overtime Calculator: Your 2025–2028 Deduction
Estimate the federal overtime deduction for 2025–2028 and the income tax it saves, from your hourly rate, overtime hours and filing status
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No Tax on Overtime Calculator: Your 2025–2028 Deduction
Printed 2026-10-27 from billorganizingapp.com/income/calculators/overtime-pay/ — an estimate for planning, not financial or tax advice.
Over a year, and the 2026 overtime deduction
Federal law (FLSA) requires 1.5× the regular rate for hours over 40 in a workweek for non-exempt employees; some states, including California, also require daily overtime. For 2025–2028 the premium portion of FLSA-required overtime is deductible up to $12,500 ($25,000 joint), reduced above $150,000 of income. It is claimed on your tax return, so your paycheck withholding may not show it. Only the half-time premium counts, so double time is shown with the half-time premium only. Not tax advice.
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"No tax on overtime" is a federal income tax deduction for 2025 through 2028, not a paycheck change. Only the premium half of time and a half counts, it's capped at $12,500 a year ($25,000 on a joint return), and Social Security, Medicare and most state taxes still apply. Enter your hourly rate, overtime hours, how many weeks a year you work them and your filing status: the calculator works out the premium part of your overtime, the deduction you may claim and the federal income tax it may save.
How the overtime deduction is calculated
Take the overtime premium, not the whole overtime check. At $25 an hour, an overtime hour pays $37.50, of which $12.50 is the premium. Ten overtime hours a week for 50 weeks is 500 hours, so $6,250 of premium: that is the deduction, as long as it's under the $12,500 cap ($25,000 joint) and your income is under the phase-out. The tax saved is the deduction × your top federal bracket; in the 12% bracket that's $750, in the 22% bracket $1,375. From 2026 employers report qualified overtime on Form W-2; for 2025, pay stubs or a statement from your employer show it. You claim the deduction on your return whether or not you itemize.
How overtime is calculated
Under the federal Fair Labor Standards Act, a non-exempt employee must be paid at least 1.5 times their regular rate for every hour over 40 in a workweek. Overtime pay = hourly rate × 1.5 × overtime hours. Double time — twice the regular rate — is not required by federal law but is paid by some employers, union contracts and, in California, for hours over 12 in a day. The table shows the time-and-a-half rate and what ten overtime hours add to a week.
| Hourly rate | Overtime rate (1.5×) | Pay for 10 overtime hours | Week total (50 hours) |
|---|---|---|---|
| $15 | $22.50 | $225 | $825 |
| $18 | $27 | $270 | $990 |
| $20 | $30 | $300 | $1,100 |
| $25 | $37.50 | $375 | $1,375 |
| $30 | $45 | $450 | $1,650 |
| $40 | $60 | $600 | $2,200 |
Who gets overtime
Most hourly employees are non-exempt and must be paid overtime. Salaried employees can be exempt if their duties fit an executive, administrative or professional exemption and they earn at least the salary threshold the Department of Labor enforces, currently $684 a week ($35,568 a year) after the 2024 rule raising it was vacated. A salaried worker below that line is owed overtime just like an hourly one. Independent contractors are not employees and are not covered. Several states set stricter rules; California, for example, requires overtime for hours over eight in a day.
The "regular rate" includes more than base pay
The rate that gets multiplied by 1.5 is the regular rate, which includes most non-discretionary bonuses, shift differentials and commissions earned in the week — not just the base hourly wage. A $20 base with a $2 night differential has a $22 regular rate, so overtime is $33 an hour, not $30. If a production bonus is paid, it is spread over all hours worked that week before the overtime premium is added.
The 2025–2028 overtime deduction
The One, Big, Beautiful Bill Act created a federal deduction for qualified overtime compensation for 2025 through 2028: the premium part of FLSA-required overtime — the "half" in time and a half — up to $12,500 a year ($25,000 on a joint return). It shrinks by $100 for every $1,000 of modified adjusted gross income above $150,000 ($300,000 joint). It lowers federal income tax only; Social Security, Medicare and most state taxes still apply to all overtime pay. It is claimed on the tax return, so paycheck withholding may not reflect it. Only the FLSA-required premium qualifies, so for double time the calculator counts the half-time portion.
Is the overtime worth it?
An overtime hour pays 50% more than a regular hour, but it is also the most tired hour of your week. If you are taking overtime to reach a savings target, divide the target by the after-tax value of one overtime hour to see how many hours it takes, and compare that with a side income that you control. The overtime-versus-side-hustle calculator on this site does that comparison.
Official sources
Tax rules, limits and pay data change. Check the current figures with the primary source before acting on them.
Frequently Asked Questions
How does no tax on overtime work?+
For 2025–2028 you can deduct the premium part of FLSA-required overtime, the extra half in time and a half, up to $12,500 a year ($25,000 joint), from income subject to federal income tax. It is claimed on your tax return; Social Security, Medicare and state taxes still apply.
How much will no tax on overtime save me?+
Your deduction times your top federal bracket. 500 overtime hours at $25 an hour is $6,250 of premium, which saves $750 in the 12% bracket or $1,375 in the 22% bracket.
How do you calculate time and a half?+
Multiply your regular hourly rate by 1.5. At $20 an hour, time and a half is $30 an hour, and 10 overtime hours pay $300.
What is double time pay?+
Twice the regular rate: $40 an hour for someone paid $20. Federal law requires only time and a half; double time comes from state law (such as California after 12 hours in a day), a contract or company policy.
Is overtime taxed more?+
No. Overtime is taxed at the same rates as other wages. A large overtime week can be withheld at a higher rate because payroll assumes every week looks like that one, but the difference comes back when you file.
Is there no tax on overtime in 2026?+
Partly. For 2025–2028 the premium portion of FLSA-required overtime can be deducted for federal income tax, up to $12,500 ($25,000 joint), phasing out above $150,000 of income ($300,000 joint). Social Security, Medicare and state taxes still apply.
Do salaried employees get overtime?+
Salaried employees earning less than $684 a week, or whose duties do not meet an exemption, must be paid overtime. Many salaried professionals and managers above that line are exempt.
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