No Tax on Overtime Calculator
The name is a nickname, not a description. Here is how it actually works: the law gives you a deduction on the premium part of your overtime — up to $12,500 a year ($25,000 on a joint return), shrinking once your MAGI passes $150,000. Enter your rate and hours to see the real figure.
“My overtime is tax-free”
Only the premium is deductible — the extra half above your regular rate, and only on hours past 40 in a week. The rest of the check is taxed normally.
“My paycheck should be bigger”
Withholding does not change on its own. This is claimed on your return, so it arrives as a smaller tax bill or a larger refund at filing — not as a bigger Friday deposit.
“No tax means no tax”
It is an income tax deduction. Social Security and Medicare still come out of every overtime dollar, premium included, at the usual 7.65%.
How it works, in three steps. First, your employer works out the FLSA overtime premium — the extra half above your regular rate on hours past 40 in a week — and reports that total in Box 12, code TT. Second, you claim it yourself on Schedule 1-A when you file, up to $12,500 ($25,000 joint), which is why nothing changes in your weekly deposit. Third, the amount shrinks once MAGI passes $150,000, so the same overtime that earned the deduction can be what takes it away.
- · Input is the FLSA-required premium only (the 0.5x half of time-and-a-half) — not total overtime pay. Use the W-2 Box 12 code TT amount when available.
Estimated tax savings (deduction × your marginal rate)
A deduction reduces taxable income — not your tax bill dollar-for-dollar.
Three people, three very different answers
Each row below is a single filer whose only income is these wages, working 40 regular hours plus the overtime shown, every week of the year. The tax saved is the deduction multiplied by the federal bracket that income actually lands in for 2026 — which is why the same deduction is worth more to some of them than to others.
| Rate & overtime | Wages | OT premium | Deduction | Bracket | Tax saved |
|---|---|---|---|---|---|
| $25/hr, 5 OT h/wk | $61,750 | $3,250 | $3,250 | 12% | $390 |
| $35/hr, 10 OT h/wk | $100,100 | $9,100 | $9,100 | 22% | $2,002 |
| $60/hr, 10 OT h/wk | $171,600 | $15,600 | $10,340 | 24% | $2,482 |
The first two rows are the straightforward case: the premium is under the cap, income is under the threshold, and the whole premium is deductible. Five overtime hours a week at $25 is $3,250 of premium across the year and $390 of tax — real, but nothing like a tax-free paycheck.
The third row is where the headline breaks down. That worker earns $15,600 of overtime premium, more than the $12,500 cap, so $12,500 is the most that can start the calculation. Then the same overtime pushes total wages to $171,600 — past the $150,000 threshold — and the phase-out removes another $2,160, at 10 cents of deduction for every dollar of income above it. The deduction lands at $10,340. Working more overtime is what shrank the overtime deduction, and past $275,000 of MAGI a single filer has none of it left.
What counts, line by line
Read down your pay stub and almost none of it feeds this deduction. One line does.
| Line on your pay | Counts? | Why |
|---|---|---|
| Your first 40 hours each week | No | Ordinary wages. Taxed exactly the way they were before this law existed. |
| The base rate inside each overtime hour | No | At time-and-a-half, one of the one-and-a-half is just your normal rate for an hour of work, so it is ordinary wages too. |
| The premium on hours past 40 in a week | Yes | The extra half that the Fair Labor Standards Act requires. This is the entire deduction — nothing else on the stub feeds it. |
| Tips | No | Not overtime premium. Tipped workers have a separate provision of the same law; it is not this one and it has its own limits. |
| Bonuses, commissions, profit share | No | Paid for results rather than for hours past 40, so no part of it is FLSA overtime premium. |
| Paid time off cashed out | No | Overtime is measured in hours actually worked. Paid leave is not worked time, and cashing it out does not turn it into any. |
| Self-employed and 1099 income | No | FLSA overtime applies to covered employees. A contractor billing 60 hours has no overtime premium to deduct. |
Premium pay itself has harder edges — double time, daily overtime required by a state rather than by federal law, union contracts that start paying a premium before 40 hours. Those are set out on the overtime deduction calculator page, along with the joint-filer cases. If you are checking whether the hourly job is worth it in the first place, the hourly to salary table converts any rate to annual pay, and take-home pay shows what federal tax and FICA leave from the total.
Available for tax years 2025–2028. Not available for married filing separately; a valid Social Security number is required. Estimates only — not tax advice.
Is overtime taxed more?
No. Overtime is taxed exactly like the rest of your wages. There is no separate overtime tax rate and no bracket that applies only to hours past 40. An overtime dollar and a regular dollar earned in the same year are treated identically by the tax code.
What people are usually noticing is withholding, not tax. A big overtime check makes that pay period look like your normal earnings, so the payroll system withholds as though you earned at that rate all year, and a larger share of the check disappears. Nothing has been taxed at a higher rate. The extra withholding is settled when you file, as a smaller balance due or a bigger refund.
Since 2025 there is a genuine break, and it runs the other way: the FLSA premium, the extra half above your regular rate, is deductible up to $12,500 a year ($25,000 on a joint return), shrinking once MAGI passes $150,000. So overtime is not taxed more than regular pay. Part of it is now taxed less. The overtime deduction calculator works out your figure, including the joint cap and phase-out cases.
Frequently asked questions
How does no tax on overtime actually work?
It is a deduction, not an exemption. Only the FLSA overtime premium counts, meaning the extra half above your regular rate on hours past 40 in a week. You claim it on Schedule 1-A when you file, so it arrives as a smaller tax bill or a bigger refund rather than a larger paycheck. Social Security and Medicare still come out of every overtime dollar.
How do I deduct overtime on my taxes?
You claim it on Schedule 1-A with your return, not through your paycheck. Take the qualified overtime premium from Box 12 code TT of your W-2, or work it out yourself as the extra half above your regular rate on hours past 40 in each week, cap it at $12,500 ($25,000 joint), then reduce it by 10 cents for every dollar your MAGI runs above $150,000. It is claimed on top of the standard deduction, so you do not have to itemize to get it.
Is overtime taxed more than regular pay?
No. It goes into the same wages, the same brackets and the same rates. A large overtime check often has more withheld because payroll treats that period as if it were your usual earnings, but withholding is a prepayment rather than the tax itself, and filing settles the difference. Since 2025 the premium half is actually deductible, so that slice is taxed less than ordinary wages, not more.
What is the income limit for no tax on overtime?
The deduction starts shrinking once your modified adjusted gross income passes $150,000, at 10 cents for every dollar above it, and a single filer has none of it left past $275,000. Your overtime counts toward that income, so a heavy year can reduce the deduction the overtime created.
How much overtime is deductible?
Up to $12,500 of qualified overtime premium a year, or $25,000 on a joint return. That is the premium only, not your total overtime pay, so the cap is far higher than it sounds. In practice the phase-out is what limits most people first.
Where does the overtime deduction show on my W-2?
Box 12, code TT, which is the qualified overtime premium your employer calculated for the year. One detail catches people out: that amount is still included in the Box 1 wages above it, unlike some other Box 12 codes that are already excluded. Code TT identifies the deductible slice of your wages, it does not remove it, and you claim the deduction yourself on Schedule 1-A. Reporting is required on 2026 through 2028 W-2s; 2025 was covered by transition relief, so a 2025 W-2 may not show the code at all.
Does no tax on overtime apply in my state?
Not automatically. This is a federal deduction, claimed on a federal schedule. Every state with an income tax writes its own rules and decides separately whether to follow a new federal deduction, so your state withholding does not change because of this. If you live in a state with no income tax the question never arises; otherwise, treat the figure on this page as the federal number only.
Is no tax on overtime permanent?
No. It covers four tax years, 2025 through 2028, and then expires unless Congress extends it. That is worth knowing if you are deciding whether to take on overtime: the deduction is available for the 2028 tax year and, as the law stands today, not after it.
Sources
Last verified: 2026-08-17 · We monitor official sources daily and update rates after human review of the originals.