No Tax on Overtime Calculator
Overtime did not become tax free. You can now deduct the premium part of your overtime, up to $12,500 a year. This works out what that is worth to you, and it is honest about the parts the headlines leave out.
This is a deduction you claim on your tax return, not a change your employer makes to your paycheck. Your withholding stays the same, so the benefit arrives as a smaller tax bill or a bigger refund.
Your federal tax falls by
$1,373
for the year
- Overtime pay for the year
- $18,720
- Of that, the deductible premium
- $6,240
- Deduction you can claim
- $6,240
Your overtime is not tax free. Only $6,240 of your $18,720 of overtime pay is deductible, because the law covers just the premium above your normal rate. Social Security and Medicare still apply to every dollar, and your state tax does not change.
Assumes 40 regular hours a week and no 401(k). The deduction runs from 2025 through 2028 only, and married filing separately cannot claim it.
What the law actually says
The rule covers overtime required by federal law, and only the part paid above your normal hourly rate. If you earn $30 an hour and get time and a half, you are paid $45 for that hour. Just the extra $15 counts. The first $30 is taxed like any other hour.
Four limits decide what you really get. The deduction stops at $12,500, or $25,000 on a joint return. It shrinks once income passes $150,000, or $300,000 filing jointly. It cuts income tax only, so Social Security and Medicare still come out in full. And it ends after 2028.
One more thing worth knowing. Your employer does not stop withholding tax on overtime. You claim this when you file, so it shows up as a smaller bill or a bigger refund.
What it is worth at different overtime loads
A single filer in Florida working 40 regular hours plus the overtime shown, at time and a half, every week of the year.
| Rate and overtime | Overtime pay | Deductible premium | Deduction | Tax saved |
|---|---|---|---|---|
| $22/hr, 5 hrs OT | $8,580 | $2,860 | $2,860 | $343 |
| $30/hr, 8 hrs OT | $18,720 | $6,240 | $6,240 | $1,373 |
| $38/hr, 10 hrs OT | $29,640 | $9,880 | $9,880 | $2,174 |
| $45/hr, 12 hrs OT | $42,120 | $14,040 | $12,500 | $3,000 |
Notice the gap between the overtime pay column and the tax saved column. That gap is why "no tax on overtime" reads bigger than it lands.
Common questions
- Is overtime really tax free now?
- No, and that is the biggest misunderstanding about this law. You can deduct only the premium part of your overtime, which is the extra half in time-and-a-half pay. The rest of your overtime is taxed normally, and Social Security and Medicare apply to all of it.
- How much overtime can I deduct?
- Up to $12,500 a year, or $25,000 on a joint return. The deduction shrinks once your income passes $150,000, or $300,000 if you file jointly, and it disappears entirely well above that.
- Will my paycheck get bigger?
- Not by itself. This is a deduction you claim on your tax return, so your employer keeps withholding as before. You feel it as a smaller tax bill or a larger refund. Your employer does report the qualified amount separately on your W-2.
- Does it lower my Social Security and Medicare tax?
- No. It only reduces income tax. Your overtime stays in your Social Security and Medicare wages in full, which is why the saving is smaller than people expect.
- Does my state stop taxing overtime too?
- Not automatically. This is a federal deduction and states set their own rules, so this page deliberately leaves your state tax unchanged rather than guessing. Check your own state before counting on a state saving.
- How long does this last?
- Through 2028. The deduction was created for tax years 2025 to 2028 and disappears after that unless Congress extends it.
Where these numbers come from
The caps, thresholds and the phase-out step are read straight from our 2026 federal tax data file, which cites the statute and IRS Notice 2025-69 for every figure. Nothing on this page is typed in by hand.