How to use the overtime calculator
This overtime calculator does two jobs. First, it works out your overtime pay: your time-and-a-half and double-time rates, your weekly paycheck and your yearly gross. Second, it works out the no tax on overtime deduction created by the One Big Beautiful Bill Act, which lets many hourly workers deduct the premium part of their overtime pay from federal taxable income for 2025 through 2028.
- Enter your hourly rate and your regular hours per week.
- Add overtime hours at 1.5× and, if you get it, at 2×.
- Set how many weeks you work and how many include overtime. Seasonal overtime? Lower the overtime weeks.
- Choose your filing status and, if your household income is higher than your pay (a working spouse, side income), enter your modified AGI so the phase-out is applied correctly.
Overtime pay formula
The Fair Labor Standards Act (FLSA) requires non-exempt employees to be paid at least 1.5 times their regular rate for hours worked over 40 in a workweek. The math:
Weekly pay = rate × regular hours + OT rate × OT hours
Qualified OT premium = rate × 0.5 × FLSA overtime hours
Deduction = min(premium, $12,500 or $25,000 joint) − $100 per $1,000 of MAGI over the threshold
Tax saved = tax without deduction − tax with deduction
Only the “half” in time-and-a-half is deductible. If you earn $28 an hour, each overtime hour pays $42, but only $14 of it is qualified overtime compensation. The $28 straight-time part is taxed like the rest of your wages, and for double-time hours the extra half beyond 1.5× doesn’t qualify either, because the FLSA only requires time-and-a-half.
Worked example: $28/hour with 8 overtime hours a week
A single filer earns $28 an hour, works 40 regular hours plus 8 hours of time-and-a-half overtime in 50 weeks of 2026, and has no other income:
| Regular pay (40 h × $28 × 52 weeks) | $58,240 |
| Overtime pay (8 h × $42.00 × 50 weeks) | $16,800 |
| Annual gross pay | $75,040 |
| Qualified overtime premium (8 h × $14.00 × 50) | $5,600 |
| Overtime deduction (under the $12,500 cap, no phase-out) | $5,600 |
| Federal income tax without the deduction | $7,679 |
| Federal income tax with the deduction | $6,447 |
| Federal tax saved | $1,232 |
The savings equal the deduction times the worker’s 22% marginal rate. Social Security and Medicare are still due on all $16,800 of overtime pay, because the deduction only affects federal income tax.
What counts as qualified overtime
Qualified overtime compensation is overtime pay required by section 7 of the FLSA that exceeds your regular rate. In practice:
- Counts: the half-time premium for hours over 40 in a workweek for non-exempt employees, including hourly workers and non-exempt salaried staff.
- Doesn’t count: the straight-time part of overtime pay, the extra premium in double time, daily overtime required only by state law (for example, over 8 hours in a day when the week is under 40), overtime paid under a union contract or company policy beyond what the FLSA requires, and pay for exempt employees who get overtime voluntarily.
- Regular rate matters: under the FLSA, non-discretionary bonuses and shift differentials are part of your regular rate, so the premium is half of that blended rate.
Independent contractors aren’t covered by the FLSA’s overtime rules, so 1099 workers can’t claim this deduction. Check the 1099 tax calculator instead.
Deduction limits and phase-out
The deduction is capped per return, not per person, and it phases out by $100 for every $1,000 of modified AGI above the threshold:
| Filing status | Maximum deduction | Phase-out starts | No deduction at MAGI of |
|---|---|---|---|
| Single | $12,500 | $150,000 | $275,000 |
| Head of household | $12,500 | $150,000 | $275,000 |
| Married filing jointly | $25,000 | $300,000 | $550,000 |
| Married filing separately | Not allowed: you must file jointly | ||
You also need a Social Security number valid for employment on the return. The deduction is available whether you take the standard deduction or itemize, but it doesn’t lower your AGI, so it won’t help with AGI-based limits elsewhere on the return.
W-2 reporting and Schedule 1-A
You claim the deduction on Schedule 1-A, the new schedule for the tips, overtime, car loan interest and senior deductions, which flows to Form 1040. The amount comes from your employer:
- For 2026 and later, employers report qualified overtime compensation separately on Form W-2, so the number you need is printed for you.
- For 2025, employers weren’t required to report it separately. The IRS allowed workers to use a reasonable method, such as adding up the overtime premium shown on pay stubs, or a separate statement from the employer.
If you expect a large overtime deduction, you can reduce your paycheck withholding by entering it as a deduction in Step 4(b) of Form W-4. The paycheck calculator and tax refund calculator help you check the result.
What no tax on overtime doesn’t cover
- FICA: Social Security (6.2% up to $184,500) and Medicare (1.45%) still apply to every overtime dollar.
- State income tax: states decide for themselves whether to follow the federal deduction, and many don’t. Your state may tax all of your overtime.
- Withholding: your employer still withholds federal tax on overtime as usual; the savings show up as a lower tax bill or bigger refund when you file.
Tip: keep your final pay stub for each year through 2028. It shows total overtime hours and pay, which makes it easy to check the W-2 figure.
Want to compare hourly and salaried offers? The salary to hourly calculator converts between the two, and the no tax on tips calculator handles the companion tips deduction.
Frequently asked questions
How do I calculate overtime pay?
Multiply your hourly rate by 1.5 to get your overtime rate, then multiply by your overtime hours. At $28 an hour, overtime pays $42.00 an hour, so 8 overtime hours add $336.00 to a week’s pay. Double time is your rate times 2.
Is overtime tax-free in 2026?
Partly. For 2025 through 2028, you can deduct the qualified overtime premium (the half in time-and-a-half) up to $12,500, or $25,000 on a joint return. The straight-time part is still taxable, and Social Security, Medicare and usually state tax still apply.
How much will no tax on overtime save me?
Your savings equal the deduction times your marginal federal rate. In the example above, $5,600 of qualified premium saves a single filer in the 22% bracket about $1,232. Enter your hours above for your own figure.
Who qualifies for the no tax on overtime deduction?
Employees who receive overtime pay required by the FLSA, have a valid Social Security number and, if married, file jointly. The deduction shrinks by $100 per $1,000 of modified AGI over $150,000 ($300,000 joint).
Does double time qualify for the overtime deduction?
Only the first half-time premium does, and only for hours over 40 in the workweek. If you earn double time for an FLSA overtime hour, the 0.5× premium qualifies but the extra 0.5× does not. Double time paid under state law or a contract for hours that aren’t FLSA overtime doesn’t qualify.
Does the overtime deduction reduce Social Security and Medicare taxes?
No. It’s an income tax deduction only. FICA is withheld on all overtime pay, and your Social Security earnings record still includes it.
Where do I claim the overtime deduction?
On Schedule 1-A, attached to Form 1040. Use the qualified overtime amount your employer reports on your W-2 (or, for 2025, a reasonable figure from your pay stubs if your employer didn’t provide one).