No Tax on Overtime Calculator
Estimate the "No Tax on Overtime" deduction from the One Big Beautiful Bill Act (OBBBA). Enter your qualifying overtime premium, filing status, and MAGI to see your above-the-line deduction and the federal income tax it saves for tax years 2025 through 2028. Only the FLSA half-time premium counts — this tool helps you find it.
Formula reviewed for accuracy. Our methodology & sources
No Tax on Overtime Calculator
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How It Works
The One Big Beautiful Bill Act created a temporary above-the-line deduction for qualified overtime pay, in effect for tax years 2025 through 2028. Because it is above-the-line, you can claim it whether you take the standard deduction or itemize. The figures here are verified against IRS guidance and Rev. Proc. 2025-32. The key detail is what counts as "qualified overtime." Only the FLSA premium — the extra "half" you earn above your regular rate under the Fair Labor Standards Act — qualifies. If you earn $20/hour and get $30/hour (time-and-a-half) for overtime, only the $10/hour premium is deductible, not the full $30. Extra overtime required only by state law or a collective bargaining agreement, beyond the federal FLSA requirement, does not count. To make this easy, if you only know your total time-and-a-half overtime pay, select that option and the calculator divides by 3 to isolate the premium portion. The deduction equals your qualifying premium, capped at $12,500 for single and head-of-household filers or $25,000 for joint filers. It then phases out: for every $1,000 (or part of $1,000) of MAGI above $150,000 (single/HoH) or $300,000 (joint), the deduction drops by $100. In plain English: subtract the threshold from your MAGI, divide by 1,000 and round up, then multiply by $100 to get the reduction. Worked example: a single warehouse worker earns $6,000 of FLSA overtime premium with MAGI of $60,000. The deduction is the full $6,000 (below the $12,500 cap, and MAGI is below $150,000). With taxable income around $43,900 after the $16,100 standard deduction, they are in the 12% bracket, so estimated savings are $6,000 × 12% = $720. For 2025, employers may report qualified overtime in Box 14 of the W-2 under a transition rule; from 2026, reporting is required. Married filing separately is not eligible. This is an estimate for planning only, not tax advice.
Formula
If you enter total time-and-a-half pay: premium = total ÷ 3 Deduction = min(premium, cap) [cap: $12,500 single/HoH · $25,000 MFJ] Phaseout = $100 × ceil(max(0, MAGI − threshold) ÷ 1,000) Final deduction = max(0, deduction − phaseout) Estimated savings = final deduction × marginal rate
Examples
Single worker, $6,000 OT premium, $60,000 MAGI
The full $6,000 premium is deductible (under the $12,500 cap, no phaseout), saving about $720 at 12%.
Total OT pay entered: $21,000 time-and-a-half, married, $90,000 MAGI
Premium = $21,000 ÷ 3 = $7,000, fully deductible under the $25,000 joint cap.
Frequently Asked Questions
What counts as qualified overtime?
Only the FLSA premium — the "half" portion above your regular rate that federal law requires for hours over 40 in a workweek. If your overtime rate is time-and-a-half, that premium is one-third of your total overtime pay. Overtime that exceeds the federal FLSA requirement because of state law or a union/collective-bargaining agreement does not qualify for the deduction.
How do I figure out my premium if I only know my total OT pay?
Select "I'll enter total time-and-a-half OT pay" and the calculator divides your total by 3 to isolate the premium. This works because time-and-a-half pay is 1.5× your regular rate: the regular-rate portion is two-thirds and the deductible premium ("half") is one-third of the total.
How much overtime can I deduct?
Up to $12,500 of qualifying premium if you file single or head of household, and up to $25,000 if you are married filing jointly. Amounts above the cap are not deductible, and the deduction phases out at higher incomes.
When does the deduction phase out?
It is reduced by $100 for every $1,000 (or part of $1,000) of MAGI above $150,000 for single/HoH filers or $300,000 for joint filers. For example, a single filer with $160,000 MAGI is $10,000 over, so the reduction is 10 × $100 = $1,000 off the deduction.
How will my overtime be reported?
For tax year 2025 there is a transition rule: employers may report qualified overtime in Box 14 of your W-2. Starting in 2026, separate reporting of qualified overtime is required, so your W-2 (or equivalent) should show the qualifying amount directly.
Can I claim it if I am married filing separately?
No. Married filing separately (MFS) is excluded. Married taxpayers must file jointly to claim the overtime deduction, and a valid Social Security number is required on the return.
Does this make overtime completely tax-free?
No. Only the FLSA premium portion is deductible for federal income tax, and only up to the cap. Your overtime is still subject to Social Security and Medicare (FICA) taxes, and often to state income tax. The regular-rate portion of your overtime pay remains fully taxable.
How long is this deduction available?
It is temporary, covering tax years 2025 through 2028. Unless extended by Congress, it sunsets after 2028. Figures are based on current IRS/OBBBA guidance and may be updated.
Sources
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