2025–2028 Updated 2026-06-22

No Tax on Overtime Calculator

See your federal income-tax savings on overtime, with the cap and phase-out applied.

$
Your tax savings
$1,190/yr
$99 per month back in your pocket
Qualified OT comp$5,408
Cap (single)$12,500
Your deduction$5,408
Bracket22%
Under the $150,000 single cutoff, the full deduction applies.
FICA still applies to overtime pay.
Estimate only

How your savings is calculated

Transparent math, no black box.

1.qualified OT comp = 0.5 × regular rate × OT hours × 52 weeks
2.deduction = min(qualified OT comp, $12,500 single / $25,000 MFJ)
3.apply MAGI phase-out ($150k/$300k → $0 at $275k/$550k)
4.your savings = deduction × your tax bracket
Here is why it’s called the half-time premium. The law defines qualified overtime compensation as the extra half-time (0.5× your regular rate), not your full 1.5× overtime pay. The deduction applies to that premium, capped at $12,500 / $25,000 MFJ. (IRS FS-2026-01)

Do you qualify?

Likely qualifies
Hourly, non-exempt employees whose overtime is required under the FLSA. Think retail, warehouse, manufacturing, food service, healthcare, and delivery workers.
Likely does not
Salaried or exempt employees, independent contractors, and workers whose overtime is only under a collective-bargaining agreement without an FLSA requirement.

No tax on overtime vs no tax on tips

Both are 2025 to 2028 OBBBA income-tax deductions with the same $150,000 single and $300,000 MFJ phase-out, but overtime caps at $12,500 ($25,000 MFJ) while tips cap at $25,000.

AspectNo tax on overtimeNo tax on tips
Max deduction$12,500 single / $25,000 MFJ$25,000 (single or MFJ)
What qualifiesFLSA half-time premiumReported tips from a listed occupation
Income phase-out starts$150,000 / $300,000 MFJ$150,000 / $300,000 MFJ
Years2025 to 20282025 to 2028
FICA still appliesYesYes

Figures from IRS FS-2026-01 and OBBBA P.L. 119-21. You can claim both in the same year if you have both kinds of pay. Try the tips calculator next.

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Common questions

How much of my overtime is tax-free in 2026?

You can deduct up to $12,500 of qualified overtime compensation ($25,000 MFJ). "Qualified overtime" is the half-time premium, which is 0.5× your regular rate × your overtime hours. It lowers taxable income. It does not make all overtime pay tax-free.

Is all overtime pay tax-free now?

No. It is an income-tax deduction on the overtime premium, capped and phased out at higher incomes. FICA taxes (6.2% and 1.45%) still apply in full.

What is the income limit for no tax on overtime?

The deduction phases out starting at $150,000 MAGI (single) or $300,000 (MFJ) and reaches $0 at $275,000 or $550,000.

Who qualifies for no tax on overtime?

You qualify if you are an hourly, non-exempt worker whose overtime is required under the FLSA, the federal time-and-a-half rule. Salaried exempt employees and independent contractors generally do not.

Is no tax on overtime a credit or a deduction?

It is a deduction, not a credit. It cuts your taxable income by up to $12,500 ($25,000 MFJ), so your savings equal that deduction times your federal tax bracket.

Does double-time overtime qualify?

Only overtime the FLSA requires counts. The half-time premium on standard time-and-a-half qualifies, while pay above the federal requirement, such as contractual double-time, does not.

How do I claim the no-tax-on-overtime deduction?

You claim it as a deduction on your federal income tax return. Your employer reports qualified overtime on your W-2 or 1099, and the IRS is giving 2025 transition relief while it finalizes the exact reporting line.

When does the no tax on overtime start and end?

Tax years 2025 through 2028. It sunsets after 2028 unless Congress extends it.

Sourced to IRS FS-2026-01, OBBBA P.L. 119-21, the Tax Foundation, and CRS R41873. Verified 2026-06-22, pending CPA sign-off.