No Tax on Overtime Calculator
Estimate your federal income tax savings under the new “No Tax on Overtime” deduction. Toggle between the statutory IRC § 225 premium rule and a 100% tax-free overtime comparison. · 100% client-side JavaScript — your figures never leave your browser.
Statutory: only the 0.5x premium half is exempt from federal income tax · FICA still applies to all OT.
Phase-out begins at $150,000 MAGI (Single) / $300,000 MAGI (MFJ).
The savings estimate applies your marginal bracket to the deductible premium. Select “Auto” to derive it from your annual gross.
| Line Item | Old Rules | No Tax on OT | Savings |
|---|---|---|---|
| Annual Gross Pay | $77,000.00 | $77,000.00 | — |
| Federal Income Tax | $8,110.00 | $6,570.00 | $1,540.00 |
| FICA (7.65%) | $5,890.50 | $5,890.50 | — |
| Net Take-Home Pay | $62,999.50 | $64,539.50 | $1,540.00 |
Comparison applies your marginal bracket to the deductible overtime premium. FICA is unchanged in both columns because the IRC § 225 deduction does not reduce Social Security or Medicare wages.
How the Federal “No Tax on Overtime” Deduction Works (IRC § 225)
The One Big Beautiful Bill Act (OBBBA) created a new above-the-line federal income tax deduction for qualified overtime compensation underIRC Section 225, effective for tax years 2025 through 2028. The rule lets eligible non-exempt employees deduct theFLSA overtime premium — the extra 0.5x “half” in time-and-a-half (1.5x) pay — from their federal taxable income.
The key distinction is between your base pay and the overtime premium. When you work overtime at 1.5x, every overtime hour pays: 1.0x base wages + 0.5x premium. Under the new rule, only the 0.5x premium portion is exempt from federal income tax. Your base 1.0x wages — both regular and the base portion of overtime — remain fully taxable as ordinary earned income.FICA (7.65% Social Security + Medicare) still applies to 100% of overtime earnings, including the premium half, because this is an income-tax deduction, not a payroll-tax exclusion.
Annual Deduction Caps & MAGI Phase-Out Thresholds
Maximum deductible FLSA overtime premium per return. Phase-out begins at $150,000 MAGI.
Maximum deductible FLSA overtime premium per return. Phase-out begins at $300,000 MAGI.
The deduction is claimed above the line on IRS Form 1040 (Schedule 1-A), so you do not need to itemize to use it. The cap applies to the premium portion only — if your annual overtime premium is below the cap, you deduct the full amount; if it exceeds the cap, the excess is taxed normally. Above the MAGI threshold, the allowable deduction phases out dollar-for-dollar until it reaches zero.
Worked Calculation Examples ($20 / $30 / $45 per Hour · 5, 10, 15 OT Hours Weekly)
Examples assume 40 regular hours per week, 50 weeks per year, Single filing status, statutory IRC § 225 mode, and the 2026 federal standard deduction ($16,100 Single). Savings are federal income tax only; FICA is unchanged.
Benchmark 1: $20.00/hr Base · 10 OT hrs/wk · 50 wks/yr · Single
- Annual gross: (40 × $20 × 50) + (10 × $30 × 50) = $55,000
- OT premium portion (0.5x): 10 × $10 × 50 = $5,000 (deductible, under the $12,500 cap)
- Federal tax under old rules: $4,420 · Under No Tax on OT: $3,820
- Annual savings: $600 · Extra per biweekly check: $23.08
Benchmark 2: $30.00/hr Base · 10 OT hrs/wk · 50 wks/yr · Single
- Annual gross: (40 × $30 × 50) + (10 × $45 × 50) = $82,500
- OT premium portion (0.5x): 10 × $15 × 50 = $7,500 (deductible, under the $12,500 cap)
- Federal tax under old rules: $9,320 · Under No Tax on OT: $7,670
- Annual savings: $1,650 · Extra per biweekly check: $63.46
Benchmark 3: $45.00/hr Base · 10 OT hrs/wk · 50 wks/yr · Single
- Annual gross: (40 × $45 × 50) + (10 × $67.50 × 50) = $123,750
- OT premium portion (0.5x): 10 × $22.50 × 50 = $11,250 (deductible, under the $12,500 cap)
- Federal tax under old rules: $18,434 · Under No Tax on OT: $15,920
- Annual savings: $2,514 · Extra per biweekly check: $96.69
Benchmark 4: Cap in Effect — $60/hr Base · 10 OT hrs/wk · 50 wks/yr · Single
- Annual gross: (40 × $60 × 50) + (10 × $90 × 50) = $165,000
- OT premium portion (0.5x): 10 × $30 × 50 = $15,000 — capped at $12,500 Single
- MAGI phase-out: $165,000 − $150,000 = $15,000 phase-out, reducing the $12,500 cap to $0
- Annual savings: $0 — at this income the full deduction phases out
Benchmark 5: $20.00/hr Base · 5 OT hrs/wk · 50 wks/yr · Single
- Annual gross: (40 × $20 × 50) + (5 × $30 × 50) = $47,500
- OT premium portion (0.5x): 5 × $10 × 50 = $2,500 (deductible, under the $12,500 cap)
- Federal tax under old rules: $3,520 · Under No Tax on OT: $3,220
- Annual savings: $300 · Extra per biweekly check: $11.54
Benchmark 6: $20.00/hr Base · 15 OT hrs/wk · 50 wks/yr · Single
- Annual gross: (40 × $20 × 50) + (15 × $30 × 50) = $62,500
- OT premium portion (0.5x): 15 × $10 × 50 = $7,500 (deductible, under the $12,500 cap)
- Federal tax under old rules: $5,320 · Under No Tax on OT: $4,420
- Annual savings: $900 · Extra per biweekly check: $34.62
Benchmark 7: $30.00/hr Base · 5 OT hrs/wk · 50 wks/yr · Single
- Annual gross: (40 × $30 × 50) + (5 × $45 × 50) = $71,250
- OT premium portion (0.5x): 5 × $15 × 50 = $3,750 (deductible, under the $12,500 cap)
- Federal tax under old rules: $6,845 · Under No Tax on OT: $6,020
- Annual savings: $825 · Extra per biweekly check: $31.73
Benchmark 8: $30.00/hr Base · 15 OT hrs/wk · 50 wks/yr · Single
- Annual gross: (40 × $30 × 50) + (15 × $45 × 50) = $93,750
- OT premium portion (0.5x): 15 × $15 × 50 = $11,250 (deductible, under the $12,500 cap)
- Federal tax under old rules: $11,795 · Under No Tax on OT: $9,320
- Annual savings: $2,475 · Extra per biweekly check: $95.19
Benchmark 9: $45.00/hr Base · 5 OT hrs/wk · 50 wks/yr · Single
- Annual gross: (40 × $45 × 50) + (5 × $67.50 × 50) = $106,875
- OT premium portion (0.5x): 5 × $22.50 × 50 = $5,625 (deductible, under the $12,500 cap)
- Federal tax under old rules: $14,682.50 · Under No Tax on OT: $13,445
- Annual savings: $1,237.50 · Extra per biweekly check: $47.60
Benchmark 10: $45.00/hr Base · 15 OT hrs/wk · 50 wks/yr · Single
- Annual gross: (40 × $45 × 50) + (15 × $67.50 × 50) = $140,625
- OT premium portion (0.5x): 15 × $22.50 × 50 = $16,875 — capped at $12,500 Single
- Federal tax under old rules: $22,484 · Under No Tax on OT: $19,484
- Annual savings: $3,000 · Extra per biweekly check: $115.38
Annual Tax Savings Lookup Table ($18/hr – $60/hr)
Pre-calculated federal income tax savings under the statutory IRC § 225 rule. Assumes 40 regular hours/week, 10 weekly overtime hours at 1.5x, 50 weeks/year, Single filing status, 2026 standard deduction ($16,100), and no MAGI phase-out. FICA is unchanged.
| Base Wage | Annual Gross | OT Premium (0.5x) | Deductible | Tax Saved / Year | Extra / Biweekly Check |
|---|---|---|---|---|---|
| $18.00/hr | $49,500.00 | $4,500.00 | $4,500.00 | $540.00 | $20.77 |
| $20.00/hr | $55,000.00 | $5,000.00 | $5,000.00 | $600.00 | $23.08 |
| $22.00/hr | $60,500.00 | $5,500.00 | $5,500.00 | $660.00 | $25.38 |
| $25.00/hr | $68,750.00 | $6,250.00 | $6,250.00 | $975.00 | $37.50 |
| $28.00/hr | $77,000.00 | $7,000.00 | $7,000.00 | $1,540.00 | $59.23 |
| $30.00/hr | $82,500.00 | $7,500.00 | $7,500.00 | $1,650.00 | $63.46 |
| $35.00/hr | $96,250.00 | $8,750.00 | $8,750.00 | $1,925.00 | $74.04 |
| $40.00/hr | $110,000.00 | $10,000.00 | $10,000.00 | $2,200.00 | $84.62 |
| $45.00/hr | $123,750.00 | $11,250.00 | $11,250.00 | $2,514.00 | $96.69 |
| $50.00/hr | $137,500.00 | $12,500.00 | $12,500.00 | $3,000.00 | $115.38 |
| $60.00/hr | $165,000.00 | $15,000.00 | $0.00 | $0.00 | $0.00 |
No Tax on Overtime FAQs
Answers to common questions about the IRC § 225 overtime premium deduction, caps, phase-outs, and FICA treatment.
How is "no tax on overtime" calculated under IRC § 225?
Under the federal "No Tax on Overtime" rule created by the One Big Beautiful Bill Act (IRC Section 225), eligible non-exempt workers can deduct the FLSA overtime premium — the 0.5x "half" in time-and-a-half (1.5x) pay — from federal taxable income. Your base 1.0x regular wages remain fully taxable; only the premium half is exempt from federal income tax. FICA (7.65% Social Security + Medicare) still applies to all overtime earnings.
Does no tax on overtime apply to Social Security and Medicare (FICA)?
No. The IRC § 225 deduction reduces federal income tax only. FICA payroll taxes (6.2% Social Security up to the $184,500 2026 wage base, plus 1.45% Medicare) still apply to 100% of your overtime earnings, including the premium half.
Is there a cap on tax-free overtime pay?
Yes. The deduction is capped at $12,500 per year for Single filers and $25,000 per year for Married Filing Jointly. The benefit phases out starting at $150,000 MAGI (Single) / $300,000 MAGI (MFJ), dollar-for-dollar above those thresholds.
Do California double-time hours qualify for the overtime deduction?
The federal deduction covers the 0.5x premium on FLSA-required weekly overtime (hours over 40 in a workweek). California-only daily overtime and double-time premiums under Labor Code § 510 are state-law premiums and are not part of the FLSA-required overtime base used for the federal deduction.
What is the difference between the statutory rule and 100% tax-free overtime mode?
Statutory mode (IRC § 225) exempts only the 0.5x premium half from federal income tax. 100% tax-free comparison mode shows the hypothetical where the entire 1.5x overtime earnings are exempt from federal income tax — useful for seeing the gap between current law and a full overtime tax exemption.
How much will I save with no tax on overtime?
Savings depend on your wage, overtime hours, filing status, and marginal bracket. A $28/hr worker with 10 weekly overtime hours (50 weeks/year, Single) saves about $1,540/year in federal income tax (~$59.23 per biweekly check). Use the calculator above for your exact figures.