No Tax on Overtime Calculator (2026)
Starting in the 2026 tax year, the One Big Beautiful Bill Act (OBBBA) lets workers deduct the overtime "premium" — the extra half-time portion of time-and-a-half pay — from federal income tax, up to $12,500 per year ($25,000 for married filing jointly), with a phase-out above $150,000 of modified AGI ($300,000 joint). This calculator shows what that means on an actual paycheck: your gross overtime pay, the federal income tax with and without the deduction, and the payroll taxes that still apply.
Quick answer: For 2026–2028, the overtime premium (the extra half of time-and-a-half) is deductible from federal income tax up to $12,500 a year ($25,000 married). A worker earning $25/hour with 10 overtime hours a week saves about $27 per overtime check in federal tax, but still pays 7.65% FICA plus any state income tax on the full overtime amount.
Paid at time and a half (1.5×)
Phase-out starts at $150K single / $300K joint
| Gross overtime pay | $375.00 |
| Regular-rate portion (taxed normally) | $250.00 |
| Deductible premium portion (the “half”) | $125.00 |
| Premium deducted from federal tax (after cap & phase-out) | $125.00 |
| Federal withholding (22% supplementalreduced by the 2026 premium deduction | − $55.00 |
| FICA (6.2% SS + 1.45% Medicare)applies to all overtime — not deductible | − $28.69 |
| State tax (custom rate 5%) | − $18.75 |
Estimate at paycheck level: federal at the 22% supplemental withholding rate with the 2026 premium deduction applied, FICA flat, state at a published supplemental rate or your custom estimate. Your actual check and tax return may differ. Not tax advice.
| What's deductible | The 0.5× premium portion of time-and-a-half pay, not the whole overtime check |
|---|---|
| Annual cap | $12,500 single / $25,000 married filing jointly (2026–2028 tax years) |
| Phase-out | Shrinks by $100 per $1,000 of MAGI above $150,000 ($300,000 MFJ) |
| Still taxed | 7.65% FICA (Social Security + Medicare) and most state income taxes |
| How you claim it | Automatic deduction — no W-4 change needed; claimed on your 2026 return |
How the 2026 overtime deduction works
The deduction covers the FLSA-required half-time premium on overtime hours — the part of time-and-a-half above your regular rate. It is an "above-the-line" style deduction: you get it whether you itemize or take the standard deduction, and there is no W-4 change. The cap is $12,500 of premium per year for single filers and $25,000 for joint filers, and it shrinks by $100 for every $1,000 your modified AGI exceeds $150,000 ($300,000 joint). The rules are scheduled to expire after the 2028 tax year unless Congress extends them.
What this calculator assumes
We split your overtime pay into the regular-rate portion and the deductible premium, then estimate federal income tax at the 22% supplemental withholding rate — the rate most employers apply to bonus and overtime checks. The no-tax-on-overtime saving is the premium × 22%, reduced if you are above the phase-out. FICA of 7.65% applies to the full overtime amount, and state tax uses your state's supplemental withholding rate where one is published. This is a paycheck-level estimate, not a guarantee of your tax return result.
Common uses
- Estimate your next overtime check under the 2026 rules before you pick up extra shifts
- Compare what you kept from overtime in 2025 versus what you should keep in 2026
- Check whether your income is above the phase-out threshold so the deduction shrinks
- See why your overtime check is still smaller than hours × 1.5 × rate — FICA and state tax do not go away