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No Tax on Overtime Calculator (2025-2028)

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Enter your overtime premium pay and income to estimate your federal "No Tax on Overtime" deduction under the One Big Beautiful Bill Act (OBBBA), for tax years 2025-2028.

No Tax on Overtime Calculator

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Deductible amount
$6,000
Max cap (before phase-out)
$12,500
Phase-out reduction
$0
Based on IRC Section 225 (OBBBA), tax years 2025-2028. Overtime still owes FICA and may owe state tax. Not tax advice - consult a tax professional.

The formula

Base cap: $12,500 (Single/HoH) or $25,000 (Married Filing Jointly) If MAGI is above the threshold ($150,000 single / $300,000 joint): Reduction = floor((MAGI - threshold) / 1,000) x $100 Effective cap = Base cap - Reduction (never below $0) Deductible amount = the SMALLER of your overtime premium pay or the effective cap
Example

Single filer, MAGI $165,000, overtime premium pay $20,000 (well above the cap): $15,000 over the threshold means a $1,500 reduction, dropping the cap to $11,000 - so the deductible amount is $11,000, even though the actual overtime premium earned was higher.

Step-by-step guide

  1. Find your overtime premium pay - only the extra "half" portion of time-and-a-half pay, not your full overtime earnings. If you worked overtime at 1.5x your regular rate, the premium is the 0.5x portion only.
  2. Select your filing status and enter your Modified Adjusted Gross Income (MAGI) for the year.
  3. Read your deductible amount - this is what reduces your federal taxable income, not a direct refund.

Why only the "premium" counts, not your full overtime pay

This is the detail most people miss: if you earn $30/hour and work overtime at $45/hour (time-and-a-half), only the extra $15/hour - the premium above your regular rate - counts as "qualified overtime compensation" under this deduction. The base $30/hour portion of your overtime hours is still ordinary taxable wages, exactly like your regular pay. For 100 overtime hours at that rate, your total overtime pay would be $4,500, but only $1,500 (the premium) is eligible for this deduction.

Common mistakes

Entering your total overtime pay instead of just the premium portion - this significantly overstates your deductible amount. Only the extra "half" of time-and-a-half pay qualifies.
Assuming "no tax on overtime" means overtime is completely tax-free - it's a deduction that reduces federal income tax specifically. FICA (Social Security and Medicare) still applies, and many states still tax overtime income.

Frequently asked questions

Does this deduction apply to salaried, exempt employees?

No - it applies to non-exempt employees under the Fair Labor Standards Act (FLSA), generally hourly workers who receive legally mandated overtime pay. Exempt salaried employees who don't receive FLSA overtime don't qualify.

Is this deduction available every year going forward?

Currently, it's only available for tax years 2025 through 2028 under the law as written. It would require new legislation to extend beyond 2028.

Can married-filing-separately taxpayers claim this deduction?

No - the deduction is not available to taxpayers using the Married Filing Separately status.

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