Overtime and pay

No Tax on Overtime Calculator: Your Federal Deduction and Tax Saving

Written and reviewed by Abdul Baseer, accountant · Published · Updated

Starts from the deduction rather than the paycheck: the qualified half, the cap and phase-out, the tax it saves beside the Social Security and Medicare tax it does not, an optional state rate, and the saving per paycheck.

In short

The deduction covers only the extra half of time-and-a-half pay on hours over 40, up to $12,500 ($25,000 joint), reduced above $150,000 ($300,000 joint) of modified AGI. At $30 an hour with 10 overtime hours a week, $7,800 qualifies and saves about $1,716 at 22%. Enter your own figures below.

  • Deduction and cap
  • Tax saved
  • Payroll tax still owed
  • Runs in your browser

Private by design. Nothing you type is uploaded or saved. Add this tool to your phone or computer for one-tap access.

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How to use the no tax on overtime calculator

  1. Enter your regular hourly rate, your overtime hours a week and the weeks you work them.
  2. Choose the overtime multiplier, usually 1.5, and your filing status.
  3. Add your modified AGI and federal tax rate to see the phase-out and the tax saved.
  4. Read the deduction, the tax saving, the payroll tax still owed and the saving per paycheck, then copy or print it.

How is the no tax on overtime deduction calculated?

Qualified overtime is half of your regular rate for each hour paid over 40 in the workweek, never more than the premium actually paid, so double time still counts only the half. The year total is capped at $12,500 ($25,000 on a joint return) and then reduced by $100 for every full $1,000 that modified AGI is over $150,000 ($300,000 joint), as on Schedule 1-A Part III. Federal tax saved is the deduction times the marginal rate you pick. Social Security and Medicare are shown at 7.65% of all overtime pay because the deduction does not change them. A state saving appears only if you enter a state rate, and it is the same deduction times that rate. Married filing separately cannot claim the deduction.

For example, an employee paid $30 an hour who works 10 hours of overtime a week for 52 weeks earns $23,400 of overtime pay at time and a half. Only the extra half, $15 an hour or $7,800, qualifies, which saves about $1,716 at a 22% federal rate. The 7.65% Social Security and Medicare tax of $1,790.10 is still owed. The pay is made up; yours comes from what you type.

Who should use the no tax on overtime calculator

  • Hourly workers who want to know what the overtime deduction is worth to them
  • Couples who want to see the joint cap and phase-out
  • Anyone planning withholding or choosing between extra shifts

Who should not use this

  • Anyone filing married filing separately, because that status cannot claim the deduction
  • Workers whose overtime is required only by state law or a union contract
  • Anyone preparing a return; the final figure comes from your Form W-2 and Schedule 1-A

Limitations

  • The tool uses your regular rate as entered. Bonuses and shift pay that raise the regular rate change the premium, so use your payroll records.
  • Federal tax saved is the deduction times the marginal rate you pick. It ignores credits, other deductions and any change in your bracket.
  • Payroll tax is shown at 7.65% of overtime pay and ignores the Social Security wage base.
  • State rules differ; the state saving is only what the rate you type implies.
  • Results are estimates, not legal, tax or payroll advice.
  • Nothing is uploaded or stored on a server. Clearing your browser data also removes the saved profile.

How is the no tax on overtime deduction calculated?

Take the extra half of your overtime pay, not all of it. The deduction is half of your regular hourly rate for each hour of overtime the Fair Labor Standards Act requires, added up for the year. At $30 an hour, each overtime hour pays $45 but only $15 of it qualifies.

Ten overtime hours a week for 52 weeks is $23,400 of overtime pay. The qualifying part is $7,800. For a single filer in the 22% bracket with modified AGI of $80,000, the deduction is $7,800, which lowers federal income tax by about $1,716.

The deduction at $30 an hour, time and a half, 52 weeks, single filer, 22% bracket
Overtime hours a weekOvertime payQualified partDeductionFederal tax saved
2 hours$4,680$1,560$1,560$343
5 hours$11,700$3,900$3,900$858
8 hours$18,720$6,240$6,240$1,373
10 hours$23,400$7,800$7,800$1,716
15 hours$35,100$11,700$11,700$2,574
20 hours$46,800$15,600$12,500$2,750
Overtime calculatorTo see the pay side with regular hours, daily overtime and California rules, use the overtime calculator.

Does double time count for the deduction?

Only the half that the FLSA requires counts. If your employer pays double time on hours over 40, the second half of the premium is a bonus the law did not require, so it is paid but not deducted. Ten hours a week at $30 an hour paid at double time is $31,200 of overtime pay with a $15,600 premium, and the qualified amount is still $7,800.

Ten overtime hours a week at $30 an hour for 52 weeks, by pay multiplier
Pay rate for overtimeOvertime payPremium paidQualified amount
1.5× the regular rate$23,400$7,800$7,800
2× the regular rate$31,200$15,600$7,800
2.5× the regular rate$39,000$23,400$7,800

Overtime that a state law or a union contract requires beyond the federal rule does not qualify either, such as daily overtime in California for hours that are not over 40 in the week. Your payroll records and the amount your employer reports decide what counts.

What are the cap and the income phase-out?

The deduction is capped at $12,500 for a single filer or head of household and $25,000 on a joint return. It then shrinks by $100 for every full $1,000 that modified AGI is over $150,000 ($300,000 on a joint return). Married filing separately cannot claim it.

A single filer at the $12,500 cap ($100 an hour, 25 overtime hours a week), 24% bracket
Modified AGIPhase-out reductionDeductionFederal tax saved
$150,000$0$12,500$3,000
$152,500$200$12,300$2,952
$155,000$500$12,000$2,880
$160,000$1,000$11,500$2,760
$175,000$2,500$10,000$2,400
$200,000$5,000$7,500$1,800

The reduction is in whole steps. Modified AGI of $152,999 is 2 full thousands over the threshold and removes $200, not $299.

Do I still pay Social Security and Medicare tax on overtime?

Yes. The deduction lowers income tax only. On $23,400 of overtime pay, the employee share of Social Security and Medicare at 7.65% is $1,790, and the deduction does not change it. The calculator shows that amount next to your income-tax saving so the two are not confused.

Social Security tax stops at the yearly wage base, so a high earner can owe less than 7.65% on the last of their pay. The estimate applies 7.65% to all overtime pay, which is right for most earners and a little high for someone over the base.

When do I get the tax saving?

Normally when you file. The deduction goes on Schedule 1-A with your return, so it lowers your tax bill or raises your refund at filing time, not in each paycheck. If you want it in your paychecks you can change your Form W-4 withholding. Spread over 26 biweekly paychecks, the example saving of $1,716 is about $66 a paycheck.

For tax year 2025, employers were not required to report qualified overtime separately, so many workers estimate the amount from their pay records using IRS guidance. From tax year 2026, employers report it in box 12 of Form W-2 with code TT. Keep your last pay stub of the year and compare the figures.

Does my state also exempt overtime?

The federal deduction is separate from state income tax. Each state decides whether to follow it, so some may and some may not. The calculator leaves the state saving at zero until you enter a rate, and the rate you enter is applied to the same deduction. Check your state revenue department before you rely on it.

Sources and review

Reviewed on 02 Nov 2026 against the published sources below. Rules and prices change, so check the current position before you rely on a figure.

Common questions

How do I calculate the no tax on overtime deduction?

Multiply half of your regular hourly rate by your overtime hours for the year, then apply the $12,500 cap ($25,000 joint) and any phase-out. At $30 an hour with 10 overtime hours a week for 52 weeks, that is $15 × 520 = $7,800.

Is overtime pay tax free now?

No. Overtime is still wages. The new rule is a deduction for the extra half of time-and-a-half pay, up to a yearly cap. Social Security and Medicare tax still apply to all of the pay.

What is the maximum no tax on overtime deduction?

It is $12,500 for a single filer or head of household and $25,000 on a joint return, for tax years 2025 through 2028. It is reduced when modified AGI is above $150,000, or $300,000 on a joint return.

How much will I save with the overtime deduction?

The saving is the deduction times your federal marginal rate. A $7,800 deduction saves about $1,716 at 22% and about $936 at 12%. The calculator above uses the rate you choose.

Does double time qualify for no tax on overtime?

Only the half-time premium needed to meet the federal overtime rule qualifies. Pay above time and a half is still taxed. The second half of a double-time premium is paid but is not deducted.

Do I need to itemize to claim the overtime deduction?

No. You can claim it whether you take the standard deduction or itemize. You must have a Social Security number valid for employment, and married couples must file jointly.

Where do I find qualified overtime on my W-2?

From tax year 2026 employers report it in box 12 with code TT. For tax year 2025 separate reporting was not required, so use your pay stubs or any statement your employer gave you.

Does the deduction lower Social Security and Medicare tax?

No. It lowers income tax only. Payroll tax at 7.65% still applies to the full overtime pay.

Guides that explain the rules

No tax on overtime, explained

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Overtime calculatorTime and a half calculatorTipped employee overtime calculatorBonus tax calculatorAnnual income calculator

Results are estimates, not legal, tax, payroll or financial advice. They follow the rules and rates named under Sources, leave out anything the page does not mention (such as other income, credits, local rules or your employer’s own policy), and can differ from a payroll run, a tax return or an agency’s decision. See the disclaimer. Found a mistake? Report an error in a calculation.