No Tax on Overtime Calculator
See how much of your overtime is tax-free under the new federal deduction, what you save, and what you actually take home.
Estimate from your pay rate and the overtime you work.
400 overtime hours, paying $15,000 on top of $52,000 for 40-hour weeks.
$5,000
off federal taxable income, per year
$650
per year
$2,348
15.7% of overtime pay
$12,653
of $15,000 overtime pay
Where your overtime pay goes, per year
of $15,000 overtime pay
- Federal income taxTop rate 12%. $5,000 is deducted, saving $650.$1,2008.0%
- Social Security6.2% × $15,000$9306.2%
- Medicare1.45% × $15,000$2181.5%
- You keep$15,000 − $2,348 in tax. State tax isn't included.$12,65384.4%
Without the $5,000 deduction, federal tax would be $1,850 and total tax $2,998, so you'd keep $12,003.
Federal tax before and after, per year
| Step | Without | With |
|---|---|---|
| Total incomewages, overtime and other income, less pre-tax savings | $67,000 | $67,000 |
| − Standard deduction | -$16,100 | -$16,100 |
| − No tax on overtime deduction | $0 | -$5,000 |
| Taxable income | $50,900 | $45,900 |
| Federal income tax | $5,910 | $5,260 |
| You save | $650 |
Uses 2026 federal brackets and the $16,100 standard deduction. Your top rate is 12%.
Get the savings in each paycheck
Enter $5,000 in Form W-4 Step 4(b), plus any other deductions you already list there. Your paycheck grows by about $25 instead of waiting for a refund.
How your overtime deduction is figured
- Your qualified overtime is $5,000. 400 overtime hours × 0.5 × $25.00 = $5,000. Only the extra half of time-and-a-half counts, never your regular rate.
- It's under the $12,500 cap. The yearly limit is $12,500, or $25,000 on a joint return.
- Your $67,000 income is under the $150,000 limit. It drops $100 for every full $1,000 of income over $150,000, or $300,000 joint.
- You save $650 in federal tax. Taxable income goes from $50,900 to $45,900, and tax from $5,910 to $5,260. That's $25 a paycheck.
- You still pay $1,148 in Social Security and Medicare. They take 7.65% of all $15,000 in overtime pay, and the deduction doesn't lower them. You keep $12,653.
No tax on overtime, explained
Example: at $25 an hour, 8 overtime hours a week for 50 weeks earns $15,000 in overtime. The extra half, $5,000, is deductible. A single filer saves $650 in 2026, about $25 a paycheck.
What is no tax on overtime?
- A federal deduction for the extra half of time-and-a-half pay.
- Up to $12,500 a year, or $25,000 if married filing jointly.
- You get it whether you itemize or take the standard deduction.
When does no tax on overtime start?
- It covers overtime paid in tax years 2025 through 2028.
- You first claim it on your 2025 return, filed in 2026, on Schedule 1-A.
- From 2026, employers report the amount on your W-2 in Box 12, code TT.
How does no tax on overtime work?
- Only the premium counts: overtime hours × 0.5 × your regular rate.
- That amount is subtracted from your taxable income, up to the cap.
- It drops $100 for every $1,000 of income over $150,000 ($300,000 joint).
- Social Security and Medicare are still taken from all overtime pay.
What are the no tax on overtime rules?
- Your employer must be legally required to pay you overtime under federal law (the FLSA).
- Salaried exempt workers don't qualify.
- Married couples must file jointly.
- You need a Social Security number valid for work.
- Overtime paid only because of state law or a union contract doesn't count beyond what federal law requires.
Does double-time pay qualify?
- Only 0.5 × your rate counts for each double-time hour.
- Federal law requires time-and-a-half, so the extra half on top isn't deductible.
Is overtime tax-free for state taxes?
- It's a federal deduction. Most states with an income tax still tax overtime.
- Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming have no wage income tax.
- Check your state's revenue department to see whether it follows the federal deduction.
Related calculators
- Salary & paycheck calculator for your full take-home pay with state tax.
- Self-employment tax calculator if you also earn 1099 income.
Rules follow Internal Revenue Code §225 (One Big Beautiful Bill Act), the IRS's Schedule 1-A instructions, and its 2026 guidance on W-2 code TT. Tax is figured with 2026 brackets and standard deductions ($16,100 single, $32,200 joint, $24,150 head of household), or 2025's for the 2025 tax year. The child tax credit is included when you enter children; other credits aren't.
This is an estimate for the 2026 tax year, not tax, legal, or financial advice. Figures are simplified and don't include every credit or deduction. Talk to a tax professional before making decisions.