Updated for tax year 2026
Overtime Pay Tax Calculator
One OT calculator for both questions: how much overtime pay you earn, and how the new federal overtime tax deduction cuts your income tax. Enter your details and the math applies the 2026 caps and MAGI phaseout instantly.
For this estimate, we assume the hourly rate you enter is your FLSA regular rate.
Enter the qualified overtime amount from Box 12, Code TT on your W-2 (reported starting with the 2026 tax year). This is only the premium half of your overtime, not your total overtime pay.
Estimates only, not tax advice. Only the 0.5× FLSA premium qualifies. This calculator estimates the federal income-tax benefit of the deduction (claimed on Schedule 1-A); it does not calculate state or local taxes, Social Security, Medicare, or your complete federal tax liability. Married filing separately does not qualify. How we calculate this.
Note: the FLSA requires overtime only on hours over 40 per week. If your regular schedule is under 40 hours, part of this may not be federally qualified overtime.
How overtime pay is calculated
Under the Fair Labor Standards Act, nonexempt employees earn time-and-a-half, 1.5 times their regular rate, for hours worked over 40 in a workweek. That 1.5× rate has two parts: your regular rate (the 1.0) plus a premium (the extra 0.5). Both parts land in your paycheck, and both are fully taxable as wages.
For example, at $25/hour with 10 overtime hours a week, your gross overtime pay is 10 × $37.50 = $375 a week. That number is the starting point of this overtime tax calculator, your actual earnings before any tax break.
How the tax deduction works
The One Big Beautiful Bill Act created a federal income tax deduction for qualified overtime compensation, but only the premium half qualifies. From the example above, only 10 × $12.50 = $125 a week of premium counts toward the deduction. The other $250 a week is regular wages for tax purposes.
The deduction is claimed on Schedule 1-A, so no itemizing is needed, and it applies for tax years 2025 through 2028. It reduces taxable income, not AGI. Three limits shape the final number:
- Annual cap: $12,500 single or head of household, $25,000 married filing jointly.
- MAGI phaseout: the deduction shrinks by $100 for every $1,000 of MAGI over $150,000 single ($300,000 joint), and disappears at $275,000 ($550,000 joint).
- Your marginal rate: the deduction saves you whatever your top federal bracket is. A $6,500 deduction at a 22% rate is worth $1,430.
For the full rulebook on who qualifies, what is excluded, and how to claim it, see our complete guide to no tax on overtime.
What qualifies (and what does not)
Qualifies: the 0.5× premium on FLSA-required overtime, earned by nonexempt employees with a valid Social Security number. Married couples must file jointly.
Does not qualify: the base 1.0× portion of overtime pay, state-law-only overtime (such as California daily overtime under 40 hours a week), voluntary employer premiums, shift differentials, and anything beyond the 0.5× FLSA premium even where double time is paid. Exempt salaried workers are excluded entirely, as are most contractors and gig workers — the rare exception is a worker treated as an independent contractor for tax purposes who is an employee under the FLSA, whose qualified overtime can be reported on Form 1099-NEC or 1099-MISC.
Worked example
A single filer earns $25/hour, works 40 regular hours plus 10 overtime hours a week, 52 weeks a year, with $60,000 MAGI and a 22% marginal rate:
- Gross overtime pay: 10 × $37.50 × 52 = $19,500 a year
- Deductible premium: 10 × $12.50 × 52 = $6,500 a year
- Cap check: $6,500 is under the $12,500 single cap, so the full amount is kept
- Phaseout check: $60,000 MAGI is under the $150,000 threshold, so no reduction
- Estimated federal tax savings: $6,500 × 0.22 = $1,430
Want just the deduction without the pay math? Our no tax on overtime calculator skips straight to the tax savings.
Frequently asked questions
How is overtime taxed in 2026?
Overtime pay is taxed like regular wages: federal income tax, Social Security, Medicare, and state/local taxes all apply. The One Big Beautiful Bill Act adds one break, a federal income tax deduction for the premium half of FLSA overtime, up to $12,500 single or $25,000 married filing jointly, for tax years 2025 through 2028.
Is overtime taxed at a higher rate than regular pay?
No. There is no special higher tax rate on overtime. It can feel that way because the extra pay lands in a higher withholding bracket on that paycheck, but your actual tax is based on your total annual income. The new deduction lowers that annual income for federal purposes.
How much of my overtime pay is tax deductible?
Only the premium half, the extra 50% in time-and-a-half on hours over 40 per week required by the Fair Labor Standards Act. The base portion of overtime pay is not deductible. The deduction is capped at $12,500 per year single or head of household, $25,000 married filing jointly.
What is the difference between overtime pay and the overtime tax deduction?
Overtime pay is what your employer pays you: usually 1.5 times your regular rate for hours over 40 a week. The tax deduction is a separate federal income tax break on just the premium half of that pay. You get the full overtime pay in your paycheck either way; the deduction only reduces the federal income tax you owe when you file.
Do I still pay Social Security and Medicare tax on overtime?
Yes. FICA applies to the full overtime payment, including the premium half. The deduction reduces federal income tax only. State and local taxes on overtime also still apply in most states.
Will the overtime deduction make my paychecks bigger?
No — not by itself. Withholding does not change during the year unless you submit an updated Form W-4 accounting for your expected overtime deduction, so your paychecks look the same otherwise. The benefit shows up when you file your federal return, as a larger refund or a smaller balance due. For 2026, the qualified premium will be reported in W-2 Box 12, Code TT.
Who does not qualify for the overtime tax deduction?
Exempt salaried employees. Most independent contractors and gig workers do not qualify either, because the deduction requires FLSA-qualified overtime — the rare exception is a worker treated as an independent contractor for tax purposes who is an employee under the FLSA, whose qualified overtime can be reported on Form 1099-NEC or 1099-MISC. Married couples must file jointly. Married filing separately does not qualify. The deduction phases out above $150,000 MAGI single ($300,000 joint) and disappears at $275,000 ($550,000 joint).
Last updated: October 2026 · Overtime tax calculator · No tax on overtime guide