The much-discussed 'no tax on overtime' is really a capped deduction for tax years 2025–2028 — and only the premium half counts. Estimate yours honestly.
For tax years 2025 through 2028, federal law allows a deduction for "qualified overtime compensation" — the overtime premium required by the Fair Labor Standards Act. The rules that drive this estimator:
Honesty note: this is an estimator built from the statute's published mechanics, not tax preparation. Employer reporting of qualified overtime on pay documents was still being phased in, and IRS guidance for these years should be checked before filing — see the IRS at irs.gov and search "overtime deduction". File with a qualified tax professional for anything beyond a rough estimate. Page current for tax years 2025–2028; it will be frozen after the provision expires.
The federal rule in one box: weekly hours and your rate in, regular hours, overtime hours at 1.5× and total gross pay out.
Free — try itYour overtime rate and overtime pay in one step — plus the part people forget: how much of it is the extra premium over straight time.
Free — try itFrom hours to every paycheque shape: weekly gross split into regular, overtime and double time, then converted to biweekly, monthly and annual equivalents.
Free — try itOne estimator for all 50 states: the federal rule where it applies, and the real daily-overtime logic for California, Alaska, Colorado, Nevada and Oregon.
Free — try itNot exactly. For 2025–2028 there is a federal deduction for the premium portion (the extra 0.5×) of FLSA-required overtime, capped at $12,500 single / $25,000 joint, with an income phase-out. Your overtime pay is still wages; the deduction reduces your taxable income at filing time.
Only overtime the FLSA itself requires — hours over 40 in a workweek paid at time and a half. Overtime owed only because of California-style daily rules, a contract, or company policy does not count toward the deduction.
Because the statute defines qualified overtime as the amount above your regular rate — the 'half' of 'time and a half.' At $20/hour with a $30 overtime rate, $10 per overtime hour is qualified.
The provision covers tax years 2025, 2026, 2027 and 2028. Unless the law changes, it disappears after 2028 — which is why this page is clearly dated.
This estimator follows the mechanics coded into the page. It starts from the qualified overtime premium — only the extra “half” of time-and-a-half pay — then applies the filing-status cap and the income phase-out, and finally multiplies what survives by the marginal bracket you select to estimate the federal tax saved.
A single filer earns $24/hour and works 180 qualified overtime hours in the year, with income of $72,000 and a 22% marginal bracket. The qualified premium is 180 × $24 × 0.5 = $2,160. That is under the $12,500 cap, and $72,000 is below the $150,000 phase-out threshold, so the estimated deduction is the full $2,160. Estimated federal tax saved: $2,160 × 22% = $475.20, which the page displays rounded to $475. Typing exactly those numbers into the calculator above gives exactly those three figures.
The deduction phases out: it shrinks by $100 for every $1,000 of income above $150,000 (single) or $300,000 (joint). At $160,000 of income, a single filer is $10,000 over the line, so the deduction is reduced by $1,000 — the worked example’s $2,160 premium becomes a $1,160 deduction, worth $255 at a 22% bracket. This page works that reduction out for you from the income figure you enter.
No. The deduction can never exceed the premium itself, and it is also capped at $12,500 single / $25,000 joint. A single filer with 1,100 overtime hours at $25/hour has a premium of $13,750, but this calculator caps the estimated deduction at $12,500.
Yes. The cap doubles to $25,000 and the phase-out threshold doubles to $300,000. The same 1,100 hours at $25/hour that hit the single cap would be fully deductible for a joint filer with income below $300,000 — an estimated deduction of $13,750 in this calculator.
No. This page estimates a deduction you claim when you file your return; it does not change anything on your paychecks. Withholding during the year is driven by your Form W-4 and your employer’s payroll, and whether and how the deduction is claimed is governed by the law and current IRS guidance for the year, not by this estimator.
Because the saving from a deduction is roughly the deduction multiplied by the rate that would have applied to that income — your marginal bracket. A full return depends on far more than overtime, so this page estimates just the overtime piece. Treat the figure as an estimate; your actual tax is set by your return under current law.
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