Overtime Tax Calculator
See what you actually keep from overtime in 2026 — federal income tax, Social Security and Medicare, plus the new “No Tax on Overtime” deduction of up to $12,500 created by the One Big Beautiful Bill Act.
Your base rate before overtime
Weeks per year
Only the FLSA-required 0.5x premium qualifies for the deduction, even if you are paid double time.
Base wages and other household income, excluding the overtime above. Used to find your bracket and the deduction phase-out.
Take-Home Overtime Pay
$15,816
of $18,750 gross, per year
“No Tax on Overtime” Saves
$1,175
federal income tax per year
Keep more of every extra hour
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Full Breakdown (annual)
Effective tax on overtime
15.7%
Marginal bracket
22%
Deduction used
$6,250 / $12,500
Your paycheck withholding does not shrink automatically — the $1,175 shows up when you file (Schedule 1-A), usually as a bigger refund. Adjust your W-4 if you want the cash during the year.
Estimates use 2026 federal brackets and the $16,100 standard deduction, and treat total income as MAGI. State and local income tax are not included and usually still apply to overtime. Verify the deduction rules on irs.gov.
How This Calculator Works
Enter your overtime
Your regular hourly rate, overtime hours per week, how many weeks a year you work them, and your pay multiplier (1.5x or 2x).
Add your tax picture
Filing status and the rest of your annual income. Both determine your bracket, your FICA, and whether the deduction phases out.
See what you keep
Federal income tax on your overtime, Social Security and Medicare, the No Tax on Overtime deduction you qualify for, and your real take-home.
Is Overtime Taxed More? The Withholding Myth
Overtime is not taxed at a higher rate. There is no separate overtime tax rate in the federal code — every dollar of wages, regular or overtime, runs through the same 2026 brackets (10% to 37%). The myth survives because of how withholding works: payroll systems annualize each paycheck, so a check swollen by overtime looks like a raise, and the system temporarily withholds at a higher rate. At filing time your actual tax is computed on your real annual income, and any over-withholding comes back as a refund.
What can happen is that extra overtime pushes some dollars into your next marginal bracket — but only the dollars above the threshold, not your whole income. And since 2025, the No Tax on Overtime deduction actually makes the premium portion of FLSA overtime cheaper than regular wages for federal income tax.
How the 2026 No Tax on Overtime Deduction Works
The One Big Beautiful Bill Act (OBBBA, July 2025) created a federal income tax deduction for qualified overtime compensation — new IRC Section 225 — for tax years 2025 through 2028:
| Rule | Detail |
|---|---|
| Maximum deduction | $12,500 single / $25,000 married filing jointly |
| What qualifies | Only the FLSA-required premium — the 0.5x “half” of time-and-a-half |
| Phase-out | −$100 per $1,000 of MAGI over $150,000 ($300,000 MFJ) |
| Fully phased out | $275,000 single / $550,000 MFJ (at the full cap) |
| How to claim | Schedule 1-A, Part III — no itemizing required; W-2 Box 12 code TT (2026) |
| Not covered | FICA (7.65%), most state income tax, married filing separately |
Example: a single machinist earning $30/hour works 500 overtime hours in 2026. Gross overtime pay is $22,500 (500 × $45), but only the $15/hour premium — $7,500 — is deductible. At a 22% marginal rate, that saves about $1,650 in federal income tax. To max out the $12,500 cap at that wage, you would need roughly 833 overtime hours a year.
What Counts as Qualified Overtime (and What Doesn't)
- Qualifies: the half-time premium on hours over 40 in a workweek that the Fair Labor Standards Act requires for non-exempt employees.
- Does not qualify:your base rate portion of overtime pay (the “1” in 1.5x), double-time premiums beyond the FLSA minimum, California-style daily overtime, holiday pay, and union-contract premiums above time-and-a-half.
- Exempt salaried employees are not owed FLSA overtime, so extra hours generate no qualified overtime compensation.
- Independent contractors are outside the FLSA entirely — long 1099 hours do not qualify. If that is you, your levers are business deductions and quarterly estimates instead — see the 1099 tax calculator.
Your employer must track the FLSA premium separately and report it in Box 12, code TT of your 2026 W-2. For 2025, the IRS granted transition relief — you compute the amount from pay stubs using the Schedule 1-A instructions.
What's Included
2026 federal brackets
Post-OBBBA brackets and the $16,100 / $32,200 standard deduction from Rev. Proc. 2025-32.
No Tax on Overtime
The $12,500 / $25,000 deduction with the FLSA-premium rule and MAGI phase-out applied for you.
Full FICA math
Social Security with the $184,500 wage base, Medicare, and the 0.9% Additional Medicare Tax.
Withholding reality check
Separates what overtime actually costs in tax from what payroll temporarily withholds.
Why Use This Calculator
Models the premium rule
Most calculators deduct your whole overtime check. Only the FLSA 0.5x premium qualifies — this tool gets that right, so your estimate matches your W-2 code TT figure.
Decide if extra shifts pay
See the real after-tax value of an extra overtime hour at your wage and bracket before you commit to more shifts.
Plan your refund or W-4
The deduction lands at filing, not in your paycheck. Knowing the number helps you adjust withholding instead of lending the IRS money all year.
Frequently Asked Questions
Official References
- IRS: What to Know About the No Tax on Overtime Deduction
Official caps ($12,500 / $25,000), MAGI phase-out thresholds, SSN and joint-filing requirements. Verified August 2026.
- IRS: Q&A on the Deduction for Qualified Overtime Compensation
Defines qualified overtime as the “half” portion of FLSA time-and-a-half and covers W-2 reporting. Verified August 2026.
- IRS: One Big Beautiful Bill Act — Deductions for Working Americans
OBBBA overview: effective years 2025–2028 and availability to non-itemizers.
- IRS Notice 2025-69
Detailed definition of qualified overtime compensation and 2025 transition relief for reporting.
- US Department of Labor: Overtime Pay (FLSA)
The time-and-a-half requirement for non-exempt employees working over 40 hours in a workweek.
This calculator provides federal estimates for tax year 2026 using IRS-published figures. It approximates MAGI as total income and excludes state and local taxes, pre-tax benefits, and credits. Consult a tax professional for advice on your specific situation.
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