Overtime Tax Calculator
See exactly how much federal income tax you owe on overtime pay and how much you can save with the OBBBA "no tax on overtime" deduction (tax years 2025 through 2028). Enter your regular wages, overtime earnings, and filing status to get your estimated tax bill, your qualified overtime deduction, and your actual take-home on overtime.
Overtime Tax Calculator
Estimate overtime taxes owed + your OBBBA overtime deduction for 2025 and 2026
Enter your overtime details to see your tax estimate and deduction savings.
How Is Overtime Taxed?
Overtime pay is taxed exactly the same way as your regular wages. The IRS treats every dollar of overtime as ordinary income, subject to federal income tax at your marginal rate, plus FICA taxes (6.2% Social Security and 1.45% Medicare). There is no special overtime tax bracket or separate rate for overtime hours.
Overtime feels more heavily taxed because it pushes your total weekly or biweekly gross income higher, which may temporarily push more of that income into a higher federal bracket. But your marginal tax rate only applies to income above each threshold, so you are always better off financially earning overtime than skipping it, even after taxes.
How to Use This Overtime Tax Calculator
Tab 1: Overtime Tax Withholding
Use this tab to estimate your weekly take-home pay when you work overtime. Enter your regular hourly rate, regular hours, and overtime hours, then choose your filing status and any other annual income (salary or wages from a second job). The calculator estimates your federal income tax using 2026 brackets, FICA, and optional state income tax to show your net weekly pay and how much of that tax came from the overtime hours specifically.
Tab 2: No Tax on Overtime Deduction (OBBBA)
Use this tab to calculate your OBBBA qualified overtime deduction and the tax savings you can claim on your federal return. Enter your total annual overtime pay, your regular hourly rate (to calculate the qualifying premium), your filing status, your MAGI, and your federal tax bracket. The calculator shows your qualifying deduction amount, any phase-out reduction, and the dollars saved in federal income tax.
The OBBBA "No Tax on Overtime" Deduction Explained
The "no tax on overtime" provision is one of the most significant changes to overtime taxation in decades. Here is exactly how it works in plain terms, based on the OBBBA statute (IRC Section 225), IRS Notice 2025-62, IRS Notice 2025-69, and the updated 2026 Form W-2 and W-4 instructions.
What Actually Qualifies
The deduction applies specifically to the overtime premium: the extra "half" portion of time-and-a-half pay. When you earn $20/hour regular and $30/hour for overtime, only the $10 premium per hour counts as qualified overtime compensation. The underlying regular-rate portion of overtime pay ($20/hour) is ordinary wage income and is fully taxable.
To put it numerically: if your total overtime pay is $15,000 for the year, your qualifying premium is $5,000 (one-third of the total). That $5,000 is the deductible amount. The remaining $10,000 in overtime pay is ordinary wage income, fully taxable.
Who Qualifies
- Must be a nonexempt employee covered by FLSA. Salaried exempt employees, independent contractors, and employees whose overtime is governed only by state law are all ineligible.
- Overtime must be FLSA-mandated (hours over 40 in a workweek at 1.5× for nonexempt employees). Overtime paid exclusively under state law, a collective bargaining agreement, or an employer policy above FLSA minimums falls outside the qualifying definition.
- Must have a valid Social Security number.
- Married filers must file jointly. Married Filing Separately status is ineligible.
Deduction Limits and Phase-Outs
| Filing Status | Max Deduction | Phase-Out Begins | Fully Phased Out |
|---|---|---|---|
| Single / Head of Household | $12,500 | $150,000 MAGI | $162,500 MAGI |
| Married Filing Jointly | $25,000 | $300,000 MAGI | $325,000 MAGI |
| Married Filing Separately | $0 | Not eligible | Not eligible |
Claiming the Deduction
The OBBBA overtime deduction is an "above the line" deduction, meaning you can claim it whether you itemize or take the standard deduction. You claim it on Schedule 1-A (Form 1040), which the IRS created specifically for OBBBA deductions. Your paycheck withholding stays unchanged. The tax benefit shows up when you file your return.
2026 W-2 Reporting (New Box 12 Code TT)
Starting with Tax Year 2026, employers must report qualified FLSA overtime compensation on W-2s using Box 12, Code TT. For Tax Year 2025, reporting was optional (employers could use Box 14 labeled "QUAL OT") and the IRS granted full penalty relief under Notice 2025-62. If your employer left qualified overtime off your 2025 tax documents, use IRS Notice 2025-69's safe harbor method: annualize your overtime from the second half of 2025 (July through December) to calculate the full-year qualifying amount.
Overtime Tax Rate: What You Actually Owe
Overtime is taxed at your marginal federal income tax rate, applied to the portion of your overtime income that exceeds each bracket threshold. Here is a practical example of how this works for a full-time worker who adds weekly overtime hours:
| Scenario | Regular Rate | OT Hours/Week | Annual OT Pay | Fed Tax on OT (est.) | FICA on OT |
|---|---|---|---|---|---|
| Light OT, 22% bracket | $22/hr | 5 hrs | $8,580 | ~$1,888 | $656 |
| Moderate OT, 22% bracket | $22/hr | 10 hrs | $17,160 | ~$3,775 | $1,312 |
| Heavy OT, 24% bracket | $30/hr | 15 hrs | $35,100 | ~$8,424 | $2,685 |
| Same worker with OBBBA deduction | $30/hr | 15 hrs | $35,100 | ~$5,424 (saved $3,000) | $2,685 |
* Federal tax estimated using 2026 brackets and standard deduction. FICA at 7.65% combined. OBBBA row assumes $12,500 deduction at 24% bracket = $3,000 saved. State taxes excluded.
Overtime Withholding vs. The OBBBA Deduction
These two concepts confuse most workers. Here is the clean distinction:
| Withholding (Paycheck) | OBBBA Deduction (Tax Return) | |
|---|---|---|
| When does it happen? | Each pay period throughout the year | When you file your federal return (April / October) |
| What does it affect? | Your take-home pay in real time | Your final federal tax liability for the year |
| Does it change your paycheck? | Yes, withholds federal tax on overtime like normal wages | No, but you get the money back as a larger refund or smaller bill |
| FICA taxes? | Withheld on all overtime, always | FICA is never affected by the OBBBA deduction |
| State taxes? | Withheld per state rules | State taxes are outside the federal deduction's reach |
State Taxes on Overtime Pay
The OBBBA "no tax on overtime" deduction applies to federal income tax only. State income tax is fully unaffected at the federal level. Whether your state gives you a similar break depends on whether it has adopted the OBBBA provision:
- States with no income tax (Florida, Texas, Nevada, Washington, Alaska, South Dakota, Wyoming): no state tax issue at all.
- States that have conformed to OBBBA: residents get a state-level overtime deduction matching or similar to the federal one. A small but growing number of states passed their own versions in 2025 and 2026.
- States without OBBBA conformity: overtime pay is fully taxable at the state level, and the federal deduction provides no relief on your state return. This covers the majority of states. Check your state's Department of Revenue for current status.