No Tax on Overtime Calculator

Only the premium. At $25 an hour, 8 overtime hours a week for 50 weeks pays $15,000 of overtime at $37.50 an hour, but only the extra $12.50 an hour, $5,000 in all, is qualified overtime. If your employer pays double time, the part above time-and-a-half still doesn't count. As a shortcut, qualified overtime is one third of time-and-a-half overtime pay, or one quarter of double-time pay.

Workers owed overtime under the Fair Labor Standards Act: generally hourly and other non-exempt employees paid time-and-a-half for hours over 40 in a workweek. You need a Social Security number valid for work, married couples must file jointly, and the deduction shrinks by $100 for every full $1,000 of modified AGI above $150,000 ($300,000 joint). Salaried exempt employees don't qualify, and neither does overtime paid only because of a state law or a union contract.

No. Overtime is still subject to the 7.65% FICA tax, 6.2% Social Security and 1.45% Medicare, and your employer still withholds income tax on it like any other wages. The deduction only lowers your federal income tax.

In your refund, unless you change your W-4. Employers withhold on overtime as normal wages. To get the benefit through your paychecks instead, enter an estimate of your qualified overtime on line 1b of the 2026 Form W-4 Deductions Worksheet, it's available there if your income is under $150,000 ($300,000 joint), and give your employer the new form.

From tax year 2026, employers report it in box 12 with code TT. 2025 W-2s didn't show it separately, so the IRS lets you work it out from a pay stub or payroll statement instead: one third of total time-and-a-half overtime pay, or one quarter of double-time pay (Notice 2025-69).

Only overtime the federal FLSA requires counts: hours over 40 in the workweek, or the special work periods for police, firefighters and hospitals. Overtime a state requires for long days in a week under 40 hours, weekend and holiday premiums, and anything above time-and-a-half don't qualify.

No. It's claimed on Schedule 1-A and taken on top of either the standard deduction or itemized deductions. It doesn't lower your adjusted gross income, so it won't change credits keyed to AGI, like the Earned Income Tax Credit.

This is a federal deduction. Whether your state follows is up to the state: most start their income tax from federal adjusted gross income, which this deduction doesn't reduce, so check your state's rules before assuming overtime is tax-free there.

It covers tax years 2025 through 2028. Unless Congress extends it, overtime earned in 2029 is fully taxable again.