No Tax on Overtime Calculator
Since 2025, workers can deduct the premium part of FLSA overtime (the "half" in time-and-a-half) and qualified tips from federal taxable income, through 2028. Enter your hourly rate and overtime hours, or the amount on your W-2, to see how much you can deduct and roughly how much federal income tax it saves.
Result
What counts as qualified overtime
Only the part of overtime pay that is above your regular rate and that the Fair Labor Standards Act requires counts. If you earn $30 an hour and get $45 for an overtime hour, $15 of that hour is qualified. The other $30 is ordinary wages and stays taxable.
FLSA overtime is pay for hours over 40 in a workweek. Overtime that only state law or a union contract requires, such as California daily overtime after 8 hours, and double-time above the FLSA's time-and-a-half, is not qualified overtime for this deduction. Salaried workers who are exempt from FLSA overtime can't use it.
Your employer reports qualified overtime on your W-2 or a separate statement. If the statement shows a figure, enter it directly instead of estimating from hours.
Limits and phase-out
The overtime deduction is capped at $12,500 a year, or $25,000 on a joint return. The tips deduction is capped at $25,000 per return. Both are reduced by $100 for every $1,000 of modified AGI above $150,000 ($300,000 for joint filers).
You don't need to itemize. Both deductions are taken in addition to the standard deduction. You need a valid Social Security number, and married couples must file jointly.
The deduction lowers federal income tax only. Social Security and Medicare tax still apply to all of your overtime and tips, and many states still tax them.
Questions
Is overtime tax-free in 2026?
Not entirely. For 2025 through 2028 you can deduct the premium part of FLSA overtime, up to $12,500 ($25,000 joint), from federal taxable income. Payroll taxes and most state taxes still apply.
Is it the whole time-and-a-half that is deductible?
No. Only the extra half counts. At $20 an hour, an overtime hour pays $30, and $10 of it is qualified overtime.
How much will no tax on overtime save me?
Multiply the deduction by your tax bracket. Example: $25 an hour, 5 overtime hours a week for 50 weeks gives 250 hours × $12.50 = $3,125. In the 12% bracket that saves about $375.
Can I claim it if I'm married filing separately?
No. Married taxpayers have to file a joint return to claim the overtime or tips deduction.
Does the phase-out start at $150,000 of salary?
It starts at $150,000 of modified adjusted gross income ($300,000 joint), and the deduction drops by $100 for each $1,000 above that.
Estimate only, not tax advice. Tax saved assumes the whole deduction falls in the bracket you pick.
Source: IRS fact sheet FS-2025-03 (No Tax on Tips, No Tax on Overtime)