No Tax on Overtime Calculator
Estimate your federal No Tax on Overtime deduction under the 2025 One Big Beautiful Bill Act. Only the time-and-a-half premium qualifies, capped at $12,500 (single) or $25,000 (joint), and it phases out above $150,000/$300,000 MAGI.
Inputs
Enter the minimum numbers needed to get a result.
Formula and example
Deductible premium = 0.5 × Regular Rate × OT Hours; Deduction = min(Premium, Cap) − Phase-out; Phase-out = $100 per $1,000 of MAGI over $150,000 ($300,000 joint).
At $25/hr and 200 overtime hours: the deductible half-time premium is 0.5 × $25 × 200 = $2,500. With MAGI under $150,000, the full $2,500 is deductible, saving about $550 at a 22% rate. You still owe ~$574 in FICA on the $7,500 of overtime pay.
Methodology & assumptions
Last updated: 2026-06-21Calculation method
Implements the qualified overtime deduction created by the One Big Beautiful Bill Act (Public Law 119-21, signed July 4, 2025) for tax years 2025–2028. Only the premium portion of overtime — the extra 'half' in time-and-a-half pay required by the Fair Labor Standards Act — qualifies, not the full overtime wage. The deduction is capped at $12,500 (single) or $25,000 (married filing jointly) and reduced by $100 for each $1,000 of MAGI above $150,000 ($300,000 joint).
Data sources
Uses the numbers you enter and standard small-business finance formulas. Benchmark comparisons use HustleFin industry benchmark pages where available.
Limitations
Estimate only, not tax advice. The deduction lowers federal income tax only — Social Security and Medicare (FICA, 7.65%) still apply to all overtime, and many states do not conform. It is available only to non-exempt W-2 employees, not self-employed contractors, and is claimed on the new Schedule 1-A. The deduction applies to tax years 2025–2028 unless extended by Congress. Verify figures against IRS.gov before filing.
Input definitions
- Regular hourly wage: Your normal (non-overtime) hourly pay rate.
- Overtime hours (year): Total overtime hours worked during the tax year, paid at time-and-a-half.
- Filing status: 0 = single / other, 1 = married filing jointly. Sets the deduction cap and MAGI threshold.
- Modified AGI (MAGI): Your modified adjusted gross income. The deduction phases out above $150,000 (single) / $300,000 (joint).
- Federal marginal tax rate: Your top federal income tax bracket, used to estimate dollars saved.
Frequently asked questions
Is all of my overtime pay tax-free?+
No. Only the 'premium' portion qualifies — the extra half-time above your regular rate in time-and-a-half pay. If you earn $25/hour and get $37.50 for overtime, only the $12.50 premium per hour is deductible, not the full $37.50. And it reduces federal income tax only, not FICA.
What is the maximum overtime deduction for 2025?+
The IRS caps the deduction at $12,500 per year for single filers and $25,000 for married couples filing jointly. The deduction phases out by $100 for every $1,000 your modified adjusted gross income exceeds $150,000 (single) or $300,000 (joint).
Do I still pay Social Security and Medicare on overtime?+
Yes. The deduction only reduces federal income tax. FICA taxes (6.2% Social Security + 1.45% Medicare = 7.65%) still apply to your entire overtime wage, including the premium portion. Your employer also still withholds normally during the year.
Can self-employed or 1099 workers claim it?+
No. The overtime deduction is limited to non-exempt W-2 employees who receive FLSA-required overtime. Independent contractors and self-employed people do not qualify. Tipped workers should instead look at the separate No Tax on Tips deduction.
How do I claim the no-tax-on-overtime deduction?+
For tax years 2025 through 2028, you claim it on the new IRS Schedule 1-A. Your qualified overtime should be reported by your employer (a 2025 transition rule lets employers use a reasonable method). Keep pay stubs that separate the overtime premium, and confirm details on IRS.gov or with a tax professional.
Continue the workflow
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