No tax on overtime calculator
Put in what your pay stub shows. See how much of your overtime you can deduct and the federal income tax you keep.
- Up to $12,500 off your taxable income, or $25,000 on a joint return.
- For overtime earned in 2025 through 2028, claimed when you file.
- Only the extra half counts, the premium in time-and-a-half.
Time-and-a-half has been law since 1938
The Fair Labor Standards Act made employers pay the extra half. For overtime earned from 2025 through 2028, that half comes off your taxable income.
How no tax on overtime works
Every overtime hour has two parts: your regular rate, and the extra half the federal overtime law adds on top. Only that extra half is deductible. Your regular pay for those hours stays taxable.
Nothing changes on your paycheck. Your employer withholds income tax, Social Security and Medicare as before. You claim the deduction when you file, and it lowers your taxable income, so you get a bigger refund or owe less.
| What counts | The premium required by section 7 of the Fair Labor Standards Act: half your regular rate for each hour over 40 in a workweek. |
|---|---|
| Yearly limit | $12,500, or $25,000 on a joint return. |
| Income limit | Shrinks by $100 for each $1,000 of modified adjusted gross income over $150,000 ($300,000 joint). Gone at $275,000 ($550,000 joint). |
| Married couples | Must file a joint return. Married filing separately gets no deduction. |
| Paperwork | A Social Security number valid for work, and Schedule 1-A attached to Form 1040. No need to itemize. |
Who qualifies, and whose overtime doesn't count
The test is whether federal law requires your employer to pay you overtime. Your job title doesn't decide it; how you're paid and classified does.
Counts
- Hourly employees paid time-and-a-half after 40 hours: warehouse, factory, retail, restaurant, construction, call centers.
- Nurses and hospital staff, including those on 8 and 80 schedules.
- Police officers and firefighters, for the overtime the federal rule requires on their work periods.
- Salaried employees who are not exempt and get overtime under the federal rule.
Doesn't count
- Exempt salaried staff: most managers, professionals and administrative employees.
- Overtime paid only because of a state law, such as California's daily overtime after 8 hours.
- Extra pay from a union contract or company policy beyond what the federal rule requires, including the second half of double time.
- Workers outside the federal overtime rule, such as many truck drivers under the Motor Carrier Act exemption, and independent contractors.
When does no tax on overtime start?
It became law on July 4, 2025, and covers overtime earned in four tax years. Each year is claimed on the return you file the following spring, the way a week's punches add up to one card.
| Tax year | When you claim it | Where the number comes from |
|---|---|---|
| 2025 | On your 2025 return, filed in 2026. Missed it? You can amend with Form 1040-X. | Your pay stubs or year-end payroll summary. Employers didn't have to report it separately this first year. |
| 2026 | On your 2026 return, filed by April 15, 2027. | Your W-2, box 12, code TT. Generally you can claim only what your employer reports there. |
| 2027 | On your 2027 return, filed in 2028. | W-2 box 12, code TT. |
| 2028 | On your 2028 return, filed in 2029. The deduction ends after this year unless Congress extends it. | W-2 box 12, code TT. |
What the deduction doesn't change
The name promises more than the law delivers. Overtime is still taxed in three ways.
Social Security and Medicare
The 7.65% payroll tax still comes out of every overtime dollar, premium included.
Your paycheck withholding
Your employer keeps withholding as before. If you expect the deduction, you can lower withholding with a new Form W-4.
State income tax
Most states still tax overtime, including California. Check with your state's revenue department.
Questions people ask
How does no tax on overtime work?
You deduct the premium part of your overtime pay, the extra half in time-and-a-half, from your taxable income when you file. Your employer still withholds tax and Social Security and Medicare as usual; the saving arrives as a bigger refund or a smaller bill. The deduction is claimed on Schedule 1-A and you can take it with the standard deduction.
When does no tax on overtime start?
It applies to overtime earned in tax years 2025 through 2028. Overtime from 2025 is claimed on the return filed in 2026; overtime from 2026 is claimed on the return you file in early 2027. It ends after 2028 unless Congress extends it.
Who qualifies for no tax on overtime?
Employees who are covered by the Fair Labor Standards Act overtime rule and not exempt from it, typically hourly workers paid time-and-a-half after 40 hours a week. You need a Social Security number valid for work, and married couples must file a joint return.
Is there an income limit?
Yes. The deduction shrinks by $100 for every $1,000 of modified adjusted gross income above $150,000, or $300,000 on a joint return. It reaches zero at $275,000 for single filers and $550,000 for joint filers.
Did no tax on overtime pass?
Yes. It became law on July 4, 2025, as part of the One Big Beautiful Bill Act, and is section 225 of the Internal Revenue Code.
Does it apply to state taxes?
It is a federal deduction. Most states that have an income tax still tax overtime, including California. A few states have adopted the deduction; check your state's revenue department.
My pay stub only shows total overtime pay. What do I enter?
Enter the total. If it was paid at time-and-a-half, the qualified premium is one third of it. If it was paid at double time, the part the federal rule requires is one quarter of it.
Do I have to itemize to claim it?
No. The deduction is taken on Schedule 1-A whether you take the standard deduction or itemize.