No Tax on Overtime Calculator 2026

Estimate how much the federal overtime deduction could lower your 2026 income tax. Enter your hourly rate and overtime hours to see the qualified "half" of time-and-a-half, your deduction after the income limit, and what your paycheck looks like with overtime.

Planning estimate based on IRS fact sheet FS-2026-13 (August 2026) and Schedule 1-A. The deduction lowers federal income tax only: Social Security, Medicare and state income tax still apply to all overtime pay. It is not tax advice.

Your overtime

Regular hourly rate

Regular hours per week

Overtime hours per week (over 40)

Weeks with overtime per year

Overtime pay rate

Filing status

Pay frequency

State

Other income on your return (spouse's wages, etc.)

Used only for the income limit, which is based on modified adjusted gross income.

Estimated federal income tax savings for 2026

$650.00

from a $5,000 overtime deduction

Overtime pay for the year: $15,000
Qualified overtime (the FLSA "half"): $5,000
After the $12,500 limit: $5,000
Income phase-out (income ≈ $67,000): − $0
Your overtime deduction: $5,000
Federal income tax without the deduction: $5,910
Federal income tax with the deduction: $5,260

Your paycheck with overtime (bi-weekly (every 2 weeks))

Gross pay: $2,576.92
of which overtime (average): $576.92
− Federal income tax: $227.31
− Social Security (FICA): $159.77
− Medicare (FICA): $37.37
− Texas state income tax: $0.00
Take-home pay: $2,152.48

Your employer keeps withholding income tax on overtime. File a new Form W-4 using Step 4(b) and about $25.00 less federal tax could come out of each paycheck; otherwise the savings arrive when you file Schedule 1-A.

Full Texas paycheck breakdown

How the no tax on overtime deduction works

The deduction for qualified overtime compensation, known as "no tax on overtime," applies to tax years 2025 through 2028. It does not make overtime pay tax free. Instead, it lets you subtract part of your overtime from taxable income on Schedule 1-A of Form 1040, whether you itemize or take the standard deduction.

Start with overtime the Fair Labor Standards Act requires: generally hours over 40 in a workweek, paid at one and a half times your regular rate.
Keep only the premium above your regular rate. With time and a half, that is the extra half.
Cap it at $12,500 per return, or $25,000 if you are married filing jointly.
If your modified adjusted gross income is above $150,000 ($300,000 joint), reduce the deduction by $100 for every full $1,000 over that amount.
Subtract what is left from taxable income. The tax you save depends on your federal bracket.

Only the "half" of time-and-a-half counts

Qualified overtime compensation is the part of overtime pay that exceeds your regular rate and is required by section 7 of the FLSA. The straight-time part of each overtime hour is ordinary wages. If your employer pays more than the law requires, such as double time, the extra is not qualified either.

Situation	Overtime paid	Qualified overtime
$20/hour, 10 overtime hours at time and a half	$300	$100
$20/hour, 10 overtime hours at double time (IRS example)	$400	$100
$30/hour, 5 overtime hours a week for 50 weeks	$11,250	$3,750
$40/hour, 15 overtime hours a week for 48 weeks	$43,200	$14,400

Overtime paid only because of a state law or union contract, for example daily overtime after eight hours or a weekend premium, counts only to the extent it is also required by the FLSA.

Worked example: $28 an hour with regular overtime

A single filer earns $28 an hour for 40 hours a week and works 10 overtime hours in 48 weeks of the year, paid at time and a half.

Regular pay is $58,240 and overtime pay is $20,160, so wages total $78,400.
The qualified part is the half-time premium: $14 × 10 hours × 48 weeks = $6,720.
That is under the $12,500 limit, and income of $78,400 is below $150,000, so the whole $6,720 is deductible.
Federal income tax drops from $8,418 to $6,940, a saving of about $1,478 for the year, or $56.86 per bi-weekly paycheck if the W-4 is updated.
Social Security and Medicare are still due on the full $20,160 of overtime pay, and so is any state income tax.

The $12,500 limit and the income phase-out

The limit applies per tax return, not per job. Above the income threshold, the deduction you can take falls in $100 steps. The table shows what is left for someone whose qualified overtime reaches the full limit.

Filing status	Modified AGI	Reduction	Maximum deduction
Single or head of household	$150,000	$0	$12,500
Single or head of household	$160,000	$1,000	$11,500
Single or head of household	$200,000	$5,000	$7,500
Single or head of household	$275,000	$12,500	$0
Married filing jointly	$300,000	$0	$25,000
Married filing jointly	$400,000	$10,000	$15,000
Married filing jointly	$550,000	$25,000	$0

A smaller amount of qualified overtime disappears sooner: someone with $5,000 of qualified overtime and a single-filer income of $200,000 loses it all, because the reduction is $5,000.

Will no tax on overtime make my paycheck bigger?

Not automatically. The IRS says overtime is still subject to federal income tax withholding, Social Security and Medicare, and an employer may not cut withholding for the deduction unless you give it an updated Form W-4. The 2026 Form W-4 lets you enter the expected deduction in Step 4(b), and the IRS Tax Withholding Estimator was updated to include it.

If you leave your W-4 alone, the savings come back as a larger refund or a smaller balance due when you file. Starting with 2026 wages, employers report qualified overtime on Form W-2 in box 12 with code TT. That figure can be larger than what you are allowed to deduct, because the limit and phase-out are applied on your return.

Who can't claim the overtime deduction

Employees exempt from the FLSA's overtime rules, such as many executive, administrative, professional, outside sales and certain computer employees. Overtime they receive is not FLSA-required.
Married couples filing separately: a married taxpayer has to file jointly to take the deduction.
Anyone without a Social Security number valid for employment.
Overtime premiums paid only under a state law, union contract or company policy beyond what the FLSA requires.

State income tax is a separate question. This is a federal deduction and each state decides whether to follow it, so the calculator keeps state income tax on your full wages. Check your state's guidance before counting on a state tax cut.

Sources and limitations

Rules come from IRS FS-2026-13, questions and answers about the deduction for qualified overtime compensation and the phase-out worksheet in Schedule 1-A (Form 1040). Federal tax uses the 2026 brackets and standard deduction on our methodology page. The estimate treats your wages plus the other income you enter as modified adjusted gross income, assumes the same overtime every week you enter, and leaves out pre-tax deductions, credits and the separate deduction for qualified tips, which the no tax on tips calculator covers.

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Frequently asked questions

Is overtime tax free in 2026?

Not completely. The "no tax on overtime" rule is a federal income tax deduction for the premium part of overtime the Fair Labor Standards Act requires, up to $12,500 a year ($25,000 on a joint return). Overtime is still subject to Social Security and Medicare taxes and to federal income tax withholding, and state income tax rules are set by each state.

How much of my overtime can I deduct?

Only the amount above your regular rate that the FLSA requires. With time-and-a-half, that is the "half": at $20 an hour, each overtime hour pays $30, and $10 of it counts. The deduction is capped at $12,500 ($25,000 for married filing jointly) and shrinks by $100 for every full $1,000 of modified adjusted gross income above $150,000 ($300,000 joint).

Does no tax on overtime apply to double time?

Only partly. If your employer pays double time, only the half-time premium the FLSA requires counts as qualified overtime. The IRS example: 10 overtime hours at $20 paid at double time is $400 of overtime pay, but only $100 is qualified overtime compensation.

How big will my overtime tax refund be?

If your employer withholds as usual, the deduction shows up as a larger refund or a smaller balance due when you file. The refund from the deduction is roughly your deduction times your federal tax bracket: a $5,000 deduction in the 12% bracket is about $600, and in the 22% bracket about $1,100. The calculator does this with the actual brackets, including when the deduction spans two of them.

When do I get the overtime tax break?

Employers keep withholding income tax on overtime unless you give them a new Form W-4. You can claim the deduction on Schedule 1-A when you file, which usually shows up as a larger refund, or you can account for it now in Step 4(b) of the 2026 Form W-4 so less tax is withheld from each paycheck.

Do salaried employees qualify for no tax on overtime?

Only if they are overtime-eligible under the FLSA. Employees who are exempt from the FLSA's overtime rules, such as many executive, administrative, professional, outside sales and certain computer employees, are not paid FLSA-required overtime, so they have no qualified overtime compensation to deduct.