Overtime tax calculator: estimate taxes on overtime pay and your No Tax on Overtime deduction (2025-2028), including caps, phase-outs, and real tax savings.
Overtime Tax Formula
The calculator first finds your gross overtime pay and the premium portion of it:
OT = R * m * H P = R * (m - 1) * H
It then applies the federal No Tax on Overtime deduction (tax years 2025 through 2028) and estimates your taxes:
D = min(P, cap) Savings = D * f
Variables:
- OT is gross overtime pay and P is the overtime premium (the extra half in time and a half), which is the only part that qualifies for the deduction
- R is your regular hourly rate, m is the overtime multiplier (1.5 for time and a half), and H is overtime hours
- D is the qualified overtime deduction; cap is $12,500 for single filers or $25,000 for joint filers, reduced by $100 for each $1,000 of modified adjusted gross income above $150,000 ($300,000 joint)
- f is your marginal federal tax bracket, so Savings is the federal income tax the deduction eliminates when you file
Enter your rate, multiplier, and overtime hours, pick your filing status and bracket, and the calculator shows the gross overtime, the deduction, the estimated withholding for federal, state, and FICA, and your effective tax rate on overtime before and after the deduction. The deduction is claimed on your tax return, so paychecks still show normal withholding; the benefit arrives as a lower tax bill or larger refund.
Overtime Deduction Value by Tax Bracket
Federal tax saved when the full overtime premium qualifies, for a worker with $10,000 of overtime premium in the year (below the caps and income thresholds).
| Marginal bracket | Qualified deduction | Federal tax saved |
|---|---|---|
| 10% | $10,000 | $1,000 |
| 12% | $10,000 | $1,200 |
| 22% | $10,000 | $2,200 |
| 24% | $10,000 | $2,400 |
| 32% | $10,000 | $3,200 |
How much overtime premium a common time-and-a-half schedule generates in a year (52 weeks):
| Hourly rate | OT hours/week | Gross OT/year | Premium (qualifies) |
|---|---|---|---|
| $20 | 5 | $7,800 | $2,600 |
| $25 | 5 | $9,750 | $3,250 |
| $25 | 10 | $19,500 | $6,500 |
| $30 | 10 | $23,400 | $7,800 |
| $35 | 12 | $32,760 | $10,920 |
| $40 | 15 | $46,800 | $15,600 |
Example Problems
Example 1: A single filer earns $25 per hour and works 10 hours of time-and-a-half overtime per week for 52 weeks, in the 22% bracket.
Gross overtime is 25 * 1.5 * 520 = $19,500. The premium portion is 25 * 0.5 * 520 = $6,500, under the $12,500 cap, so D = $6,500.
Federal tax saved is 6,500 * 0.22 = $1,430 when filing. Withholding on the overtime itself is roughly 22% federal plus 7.65% FICA, so take-home before the deduction is about $13,718, and about $15,148 once the deduction benefit is counted.
Example 2: A joint filer with $320,000 of MAGI and $9,000 of overtime premium.
MAGI is $20,000 over the $300,000 threshold, so the cap is reduced by 20 * $100 = $2,000. The deduction is min(9,000, 25,000) – 2,000 = $7,000, saving 7,000 * 0.24 = $1,680 in the 24% bracket.
Frequently Asked Questions
Is overtime really tax-free now?
Not entirely. For 2025 through 2028 you can deduct the premium portion of FLSA overtime, up to $12,500 ($25,000 joint). The straight-time part of an overtime hour is still fully taxable, Social Security and Medicare still come out of every overtime dollar, and most states still tax it. The deduction reduces federal income tax only.
Does my paycheck get bigger right away?
Generally no. Employers keep withholding normally; you claim the deduction on your federal return, so the benefit shows up as a larger refund or smaller balance due. Your employer will report qualified overtime separately on your W-2 so you can claim it.
Who does not qualify?
The deduction covers overtime required by the federal FLSA, so exempt salaried employees with no FLSA overtime get nothing from it. Married taxpayers must file jointly to claim it, a valid Social Security number is required, and above $150,000 MAGI ($300,000 joint) the deduction phases out by $100 per $1,000 of extra income.
