No Tax on Overtime Calculator (2026)
Under the new federal law you can deduct qualified overtime pay from your taxable income for 2025 through 2028. The catch most people miss: only the extra "half" of time-and-a-half counts, not your whole overtime check. This calculator shows the real number.
The part most people get wrong
If you earn $25 an hour, your overtime rate is $37.50. Only the extra $12.50 per overtime hour is "qualified overtime compensation". The base $25 you would have earned anyway is taxed normally. So 8 overtime hours a week for 50 weeks gives $15,000 of overtime pay, but only $5,000 of it is deductible.
2026 rules at a glance
Who qualifies
- Non-exempt employees who get overtime required by the federal Fair Labor Standards Act (FLSA), usually hours over 40 in a week.
- Overtime paid only because of a state rule (for example daily overtime) or a union contract may not count if federal law does not require it.
- Salaried exempt workers who do not get overtime under the FLSA do not qualify.
- Married couples must file jointly, and you need a valid Social Security number.
Examples
How this calculator works
It adds up your regular pay, your overtime pay and any other household income. Qualified overtime is your hourly rate times 0.5 times your overtime hours. That amount is capped at $12,500 (or $25,000 married) and reduced by $100 for each $1,000 of income above $150,000 (or $300,000). Then it figures your 2026 federal income tax with the standard deduction, with and without the deduction, and shows the difference.
Want to see your full overtime paycheck first? Use the overtime pay calculator.
FAQ
Is all my overtime pay tax-free?
No. Only the premium part, usually the extra half of time-and-a-half, can be deducted, and only from federal income tax.
Does this lower Social Security and Medicare tax?
No. Overtime is still subject to Social Security and Medicare tax. Most states also still tax it.
What about double time?
Only the overtime premium required by federal law counts. If you are paid double time, generally only the first extra half of your rate qualifies.
How will I know my qualified overtime amount?
Employers are expected to report it to you, for example on your W-2 or a separate statement. Keep your pay stubs to check.
Do I need to itemize?
No. You can take the overtime deduction with the standard deduction.
Rules and rates last checked: October 2026. This is an estimate for general information only, not financial, tax or legal advice. Check IRS.gov or a tax professional before you file.