United States · IRS tax deduction
No tax on overtime calculator.
Enter your regular hourly rate and your overtime hours. See the part of your overtime pay that is deductible for 2025 through 2028, and what it could save you in federal tax.
Only the premium half of time-and-a-half is deductible, not the whole overtime check. At $30 an hour, an overtime hour pays $45, but only $15 of it counts. The deduction is capped at $12,500 ($25,000 joint) and shrinks by $100 for every full $1,000 of modified AGI over $150,000 ($300,000 joint). You do not need to itemize.
Your inputs
Estimate
How the deduction is calculated
Premium = regular hourly rate × 0.5 × overtime hours. Deduction = the smaller of the premium and $12,500 ($25,000 joint), minus $100 × the number of full $1,000 steps your MAGI is over $150,000 ($300,000 joint), never below zero. Tax saved = deduction × your marginal rate.
Why half? The statute defines qualified overtime compensation as overtime pay required by section 7 of the Fair Labor Standards Act that is in excess of the regular rate. At 1.5 times the regular rate, the first 1.0 is your normal pay and only the extra 0.5 is deductible. Double-time, or any premium your employer pays above what the FLSA requires, is not what the statute describes.
Worked example
Single filer, $30 an hour, 200 overtime hours, MAGI $85,000, 22% bracket. Overtime pay is $30 × 1.5 × 200 = $9,000. The premium is $30 × 0.5 × 200 = $3,000. MAGI is under $150,000 so there is no phase-out, and $3,000 is under the $12,500 cap. $3,000 × 22% = $660 of estimated federal tax saved.
Phase-out example: same premium of $3,000 at $162,500 of MAGI. That is $12,500 over $150,000, which is 12 full $1,000 steps. 12 × $100 = $1,200. $3,000 − $1,200 = $1,800.
Rounding: why full steps
The statute says $100 “for each $1,000” and does not spell out partial amounts. The IRS 2025 Schedule 1-A, line 19, tells you to divide by $1,000 and round down to a whole number (1.5 becomes 1, 0.05 becomes 0). This calculator follows the form, so $150,999 of MAGI costs nothing and $151,000 costs $100. Note this is the opposite of the rounding on the car-loan deduction, so do not reuse one calculator for the other.
What counts, and what does not
- Overtime required by the FLSA, paid above your regular rate. State-law overtime that goes beyond the FLSA is not covered by the statute’s wording, so treat it with care and check the IRS guidance.
- Qualified tips are excluded from this deduction (section 225(c)(2)).
- Your regular rate can be higher than your base hourly pay if you also get shift differentials or non-discretionary bonuses. Use your true regular rate for an accurate premium.
- The amount must be included on the statement your payer gives you (W-2 or other specified statement). Your payer’s figure, not this calculator, is what goes on your return.
- You need a valid Social Security number on the return, and if you are married you must file jointly.
- It is a deduction against income tax. It does not change the Social Security and Medicare tax taken out of your pay.
Frequently asked questions
Is all of my overtime pay tax-free?
No. Only the premium portion above your regular rate is deductible, which is the “half” in time-and-a-half. The straight-time part of your overtime hours is taxed like any other wages.
What is the maximum no-tax-on-overtime deduction?
$12,500 a year, or $25,000 on a joint return, for tax years 2025 through 2028 (26 U.S.C. 225(b)(1)).
At what income does the deduction phase out?
It is reduced by $100 for each $1,000 your modified AGI is above $150,000 ($300,000 joint). On the IRS Schedule 1-A the division by $1,000 is rounded down to a whole number.
Do I have to itemize to claim it?
No. The IRS says the deduction is available to both itemizing and non-itemizing taxpayers.
Does it lower my Social Security and Medicare tax?
No. It is a deduction when you figure income tax on your return. Payroll taxes withheld from your wages are not changed by it.
Does this include state tax?
No. This is a federal estimate only. State treatment varies, so check your state revenue agency.
How do I know my qualified overtime amount?
Section 225 ties the deduction to amounts reported on your W-2 or other specified statement. The IRS said it would give transition relief for tax year 2025, so check the current Schedule 1-A instructions for how to figure it if your statement does not show it separately.
Sources and cite this page
Official sources: 26 U.S.C. 225, Qualified overtime compensation (cap, phase-out, definition, SSN and joint-return rules, termination after 2028); IRS Fact Sheet FS-2025-03 (July 14, 2025, updated July 25); 2025 Schedule 1-A (Form 1040), Part III (the round-down rule on line 19). Rules verified October 1, 2026. The deduction is not available for tax years beginning after December 31, 2028.
Cite this page: TNAADO Tools, “No Tax on Overtime Calculator 2025-2028,” tools.tnaado.ca/us/no-tax-on-overtime-deduction-calculator.html, rules as of October 1, 2026.
Estimate only
This page is educational and is not tax advice. Your actual deduction depends on how your payer reports qualified overtime and on your full return. Confirm with the IRS instructions or a qualified tax professional before filing.