No Tax on Overtime Calculator
Find out how much of your overtime pay is deductible under the One Big Beautiful Bill Act. Free, instant, no signup.
Regular rate (not OT rate)
Hours worked beyond 40/week
Modified Adjusted Gross Income
Overtime Premium Deduction
$6,250
✅ You qualify for the full deduction
⚠️ This calculator provides estimates for informational and educational purposes only. It is not tax advice. Results are based on the One Big Beautiful Bill Act (OBBBA) and IRS Schedule 1-A. Consult a qualified tax professional for your specific situation.
How the Overtime Deduction Works
Only the premium portionof your overtime counts — that's the extra 0.5× above your regular rate. If your hourly rate is $25 and you work overtime at $37.50/hour, only the extra $12.50/hour is deductible.
For example, if you earn $25/hour and work 500 hours of overtime in a year:
- • Overtime rate: $25 × 1.5 = $37.50/hour
- • Premium portion: $37.50 − $25 = $12.50/hour
- • Total deductible amount: $12.50 × 500 = $6,250
- • At the 22% bracket, that saves you $1,375 in federal income tax
- • Maximum deduction: $12,500 (single) / $25,000 (married filing jointly)
- • Income phase-out: Single: $150,000–$275,000 MAGI | MFJ: $300,000–$550,000
- • Eligible tax years: 2025–2028
- • Who qualifies: W-2 hourly employees working overtime (not self-employed or 1099)
How to Claim the Overtime Deduction
The OBBBA overtime deduction is an above-the-line adjustment, meaning you claim it whether you itemize or take the standard deduction.
- Find your qualified overtime premium amount (see below)
- Report it on IRS Schedule 1-A, line for OBBBA overtime deduction
- The deduction reduces your adjusted gross income (AGI)
- Your tax savings = deduction amount × your marginal tax bracket
Where to Find Your Overtime Amount
For tax year 2025, check:
- • W-2 Box 14 (look for "OT Pay" or "OT Premium")
- • Your final 2025 paystub
- • Your employer's payroll or HR portal
For tax year 2026 and beyond, employers are required to report qualified overtime directly on your W-2.
Income Phase-Out Explained
If your modified adjusted gross income (MAGI) falls within the phase-out range, your deduction is reduced proportionally. Above the upper limit, you get no deduction.
| Filing Status | Full Deduction Below | No Deduction Above |
|---|---|---|
| Single | $150,000 MAGI | $275,000 MAGI |
| Married Filing Jointly | $300,000 MAGI | $550,000 MAGI |
Frequently Asked Questions
How is the overtime deduction different from regular overtime pay?
Regular overtime pay is taxed normally. The OBBBA creates a new deduction: only the premium half (the extra 0.5× above your base rate) can be subtracted from your taxable income. This reduces your federal income tax but does not change what your employer pays you.
What counts as qualified overtime under the OBBBA?
Qualified overtime means hours worked beyond 40 per week by a W-2 employee, paid at time-and-a-half. Only the premium portion (the 0.5× multiplier on top of your regular rate) is deductible. Salaried employees, independent contractors, and self-employed workers do not qualify.
How much can I deduct?
Up to $12,500 for single filers or $25,000 for married filing jointly. The deduction phases out for single filers with MAGI between $150,000 and $275,000, and for MFJ between $300,000 and $550,000.
Do I need to itemize to claim the overtime deduction?
No. The OBBBA deductions are above-the-line adjustments — you can claim them whether you take the standard deduction or itemize. Report the deduction on Schedule 1-A of your federal tax return.
Does this calculator account for FICA taxes?
No. FICA taxes (Social Security 6.2% and Medicare 1.45%) still apply to all wages including overtime. The OBBBA deduction only reduces your federal income tax, not payroll taxes.
Which tax years does this apply to?
The OBBBA overtime deduction is available for tax years 2025 through 2028. For 2025, check your last paystub or W-2 Box 14 for overtime amounts. Starting with 2026, employers are required to report qualified overtime separately on your W-2.