No Tax on Overtime Calculator (2025 to 2028)
Enter your overtime hours and regular hourly rate. The calculator finds the deductible premium, applies the cap and phase-out, and estimates what you save.
Rules checked against the primary sources on .
Only the "half" counts
The law lets you deduct qualified overtime compensation. That is the amount paid above your regular rate for overtime the Fair Labor Standards Act requires. For time-and-a-half, it is half your regular rate times your overtime hours. Your straight-time pay for those hours is still taxed.
| Situation | Rule |
|---|---|
| Maximum deduction | $12,500 ($25,000 joint) |
| Phase-out starts | $150,000 MAGI ($300,000 joint) |
| Phase-out rate | $100 per full $1,000 over |
| Married filing separately | Not allowed |
| Years | 2025 to 2028 |
Example
Maria earns $28 an hour and works 300 overtime hours in 2026. Her overtime rate is $42, so the premium is $14 an hour. 300 × $14 = $4,200, well under the $12,500 cap. With income of $70,000 there is no phase-out, so she deducts $4,200. In the 22% bracket that saves about $924 of federal income tax.
Sources
Common questions
Is all overtime pay tax-free now?
No. Only the premium part is deductible: the extra half in time-and-a-half. If you earn $30 an hour and $45 for overtime, $15 of each overtime hour counts.
How much overtime can I deduct?
Up to $12,500 a year, or $25,000 on a joint return, for tax years 2025 to 2028. The amount falls by $100 for each full $1,000 of modified AGI over $150,000 ($300,000 joint).
Does overtime from a union contract or state law count?
The deduction covers overtime required by section 7 of the Fair Labor Standards Act. Extra pay that only a state law or a contract requires, such as daily overtime after 8 hours, does not count.
Where will I see the qualified overtime amount?
Employers must report qualified overtime separately. For 2025 many employers give it in a separate statement or box 14 of the W-2.
Does the deduction lower Social Security and Medicare tax?
No. It only reduces federal income tax. Payroll taxes are still withheld on all overtime pay.