Estimate your 2026 'No Tax on Overtime' deduction and federal tax savings under the OBBBA — the deductible premium, the cap, and the income phase-out.
Pick a worker, then adjust the rate, overtime hours, and income to match yours.
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The One Big Beautiful Bill Act (OBBBA), enacted in 2025, created a federal 'No Tax on Overtime' deduction for tax years 2025 through 2028. Despite the name, it doesn't make overtime completely tax-free: it's a deduction on only the premium 'half' of time-and-a-half pay, it's capped, it phases out at higher incomes, and Social Security, Medicare, and state taxes still apply. This calculator estimates the part of your overtime that qualifies, applies the cap and income phase-out, and shows your realistic federal income-tax savings — plus what's still withheld and owed — so you know what to actually expect at tax time.
The No Tax on Overtime deduction lets eligible W-2 employees deduct qualified overtime pay from their federal taxable income. 'Qualified overtime' is only the premium portion — the extra 'half' in time-and-a-half — not your full overtime paycheck. For example, if your regular rate is $30/hour, your overtime rate is $45/hour, and only the $15/hour premium counts. The deduction is capped at $12,500 for single filers and $25,000 for married couples filing jointly, and it phases out by $100 for every $1,000 of modified adjusted gross income above $150,000 (single) or $300,000 (joint). It applies to tax years 2025–2028, is claimed when you file (not through paycheck withholding), and does not reduce Social Security, Medicare, or state income taxes. Independent contractors do not qualify.
No Tax on Overtime Formula
Nurses, trades, manufacturing, and logistics workers who log steady overtime.
Police, fire, and EMS personnel who work heavy overtime and want their real savings.
See the after-tax value of picking up more overtime hours.
Estimate the benefit for each year the deduction is available.
Understand the qualified overtime amount reported in Box 12 (code TT).
See how the income phase-out reduces or eliminates the deduction above $150k/$300k.
Get your actual federal tax savings — based on the premium only, your bracket, the cap, and any phase-out.
'No tax on overtime' doesn't mean tax-free. We show exactly what qualifies and what's still taxed.
Automatically applies the $12,500/$25,000 cap and the high-income phase-out so your estimate is realistic.
Enter your hourly rate and overtime hours — no need to know the 'premium' or do the math yourself.
Shows the FICA and state tax that still apply, so there are no surprises at tax time.
No tax-software sign-up — just a clear estimate you can run anytime.
No — that's a common misconception. The OBBBA created a federal income-tax deduction for qualified overtime, not a full exemption. It applies only to the premium 'half' of time-and-a-half pay, it's capped, it phases out at higher incomes, and Social Security, Medicare, and most state taxes still apply. This calculator shows your actual federal savings, not a 'tax-free' fantasy.
Up to $12,500 if you file single (or head of household) and up to $25,000 if you're married filing jointly — but only the qualifying premium portion of your overtime counts toward that cap, and the deduction shrinks at higher incomes.
Only the premium — the extra 'half' above your regular rate in time-and-a-half pay. If you earn $30/hour regular and $45/hour overtime, just the $15/hour premium qualifies, not the full $45. The straight-time portion of overtime does not count.
Not automatically. It's a deduction you claim when you file your tax return, so your employer still withholds taxes from overtime as usual. You see the benefit as a larger refund or lower tax bill at filing, unless you adjust your W-4 withholding.
Yes. The deduction only reduces federal income tax. FICA taxes (7.65% for Social Security and Medicare) still apply to all of your overtime, including the premium, and most states still tax it too.
The deduction begins to phase out when your modified adjusted gross income exceeds $150,000 (single) or $300,000 (married filing jointly), dropping by $100 for every $1,000 over the threshold. It's fully phased out around $275,000 (single) and $550,000 (joint).
Tax years 2025 through 2028, under the One Big Beautiful Bill Act. It's currently scheduled to end after 2028 unless Congress extends it.
No. The No Tax on Overtime deduction is available whether you take the standard deduction or itemize, so most workers can claim it.
Your employer reports your qualified overtime on your W-2 (Box 12, code 'TT' starting in 2026). You then claim the deduction on your federal return. Only W-2 employees qualify — independent contractors and certain workers such as rail carriers do not.
Your federal savings is the qualifying deduction multiplied by your marginal tax rate. For example, $8,000 of qualified overtime premium for someone in the 22% bracket saves about $1,760 in federal income tax — but you would still owe FICA and any state tax on that premium. Enter your numbers above for your personal estimate.