No Tax on Overtime Calculator (2025-2028) | Free Federal Tax Deduction Tool
Calculate your No Tax on Overtime deduction. Free calculator shows how much you save with the new 2025 overtime tax deduction. Up to $12,500 single / $25,000 joint.
Federal Income Tax Guide HubNo Tax on Overtime Calculator (2025-2028)
Calculate your exact overtime tax deduction under the new federal "No Tax on Overtime" provision. This calculator shows how much you can deduct and how much you'll save on your federal taxes.
No Tax on Overtime Calculator (2025-2028)
Calculate your overtime tax deduction under the new federal tax law
Get help from a ProfessionalMarried filing separately is NOT eligible for this deduction
Your MAGI is typically your AGI (line 11 on Form 1040). Phase-out starts at $150,000
Time-and-a-half pay for hours over 40/week. Your employer reports this on your W-2 (box 14 or 12 code "TT")
Your highest federal tax bracket (use our tax bracket calculator if unsure)
Important: This calculator is for estimation purposes only. Actual tax savings may vary based on your complete tax situation. The "No Tax on Overtime" provision is currently in effect for tax years 2025-2028. Consult a tax professional for personalized advice. This deduction does not reduce payroll taxes (Social Security and Medicare).
What is No Tax on Overtime?
No Tax on Overtime is a new federal tax provision that became law on July 4, 2025. It allows eligible workers to deduct up to $12,500 (single filers) or $25,000 (married filing jointly) of qualified overtime compensation from their taxable income.
Key Facts
- Deduction Limits: $12,500 (single/head of household) or $25,000 (married jointly)
- Phase-out Starts: $150,000 MAGI (single) or $300,000 MAGI (joint)
- Complete Phase-out: $275,000 MAGI (single) or $550,000 MAGI (joint)
- Tax Years: 2025, 2026, 2027, 2028 (subject to extension)
- Qualified Overtime: Time-and-a-half pay for hours over 40/week (FLSA rules)
How the Deduction Works
Step 1: Determine Your Qualified Overtime Compensation (QOC)
Your employer calculates this for you. It's the time-and-a-half portion of overtime pay earned for hours exceeding 40 in a workweek.
Example:
- Regular pay: $25/hour
- Overtime pay: $37.50/hour
- Hours over 40: 10 hours/week × 50 weeks = 500 hours
- QOC: 500 hours × $37.50 = $18,750
Step 2: Check the Phase-out
If your Modified Adjusted Gross Income (MAGI) exceeds the threshold, your deduction is reduced by $100 for every $1,000 over:
| Filing Status | Phase-out Starts | Complete Phase-out |
|---|---|---|
| Single | $150,000 | $275,000 |
| Married Jointly | $300,000 | $550,000 |
| Head of Household | $150,000 | $275,000 |
Example phase-out calculation:
- Single filer, MAGI: $175,000
- Over threshold by: $25,000
- Phase-out: 25 thousands × $100 = $2,500 reduction
- Available deduction: $12,500 - $2,500 = $10,000
Step 3: Calculate Your Deduction
Your deduction is the lesser of:
- Your qualified overtime compensation
- Your available deduction (after phase-out)
Who Qualifies?
✅ You Qualify If:
- Non-exempt employee (eligible for overtime pay)
- Receive W-2 or 1099 reporting qualified overtime
- MAGI under $275,000 (single) or $550,000 (joint)
- File single, married jointly, or head of household
- Earn time-and-a-half for hours over 40/week
❌ You Don't Qualify If:
- Married filing separately
- MAGI at or above complete phase-out threshold
- Exempt employee (not eligible for overtime under FLSA)
- No qualified overtime compensation
Real-World Examples
Example 1: Nurse Working Extra Shifts
Scenario:
- Filing status: Single
- Regular pay: $35/hour
- Overtime hours: 8 hours/week × 48 weeks = 384 hours
- Overtime earnings: 384 × $52.50 = $20,160
- MAGI: $85,000
- Tax bracket: 22%
Result:
- Deduction: $12,500 (capped at maximum)
- Tax savings: $2,750
Example 2: Factory Worker
Scenario:
- Filing status: Married jointly
- Regular pay: $28/hour
- Overtime hours: 12 hours/week × 50 weeks = 600 hours
- Overtime earnings: 600 × $42 = $25,200
- MAGI: $125,000
- Tax bracket: 22%
Result:
- Deduction: $25,000 (capped at maximum)
- Tax savings: $5,500
Example 3: High Earner with Phase-out
Scenario:
- Filing status: Single
- Overtime earnings: $15,000
- MAGI: $200,000
- Tax bracket: 32%
Calculation:
- Over threshold: $200,000 - $150,000 = $50,000
- Phase-out: 50 thousands × $100 = $5,000
- Available deduction: $12,500 - $5,000 = $7,500
- Actual deduction: Lesser of $15,000 or $7,500 = $7,500
- Tax savings: $2,400
Tax Savings by Income Level
Single Filers (22% bracket)
| Overtime Earned | MAGI | Deduction | Tax Savings |
|---|---|---|---|
| $8,000 | $75,000 | $8,000 | $1,760 |
| $12,500 | $75,000 | $12,500 | $2,750 |
| $15,000 | $75,000 | $12,500 | $2,750 |
| $12,500 | $175,000 | $10,000 | $2,200 |
| $12,500 | $225,000 | $5,000 | $1,100 |
Married Joint Filers (24% bracket)
| Overtime Earned | MAGI | Deduction | Tax Savings |
|---|---|---|---|
| $15,000 | $150,000 | $15,000 | $3,600 |
| $25,000 | $150,000 | $25,000 | $6,000 |
| $30,000 | $150,000 | $25,000 | $6,000 |
| $25,000 | $350,000 | $20,000 | $4,800 |
| $25,000 | $450,000 | $10,000 | $2,400 |
Important Limitations
You Still Owe Payroll Taxes
Payroll taxes (15.3%) still apply to ALL overtime pay:
- Social Security tax: 6.2%
- Medicare tax: 1.45%
- Additional Medicare: 0.9% (high earners)
- Employer match: 7.65%
This deduction only affects federal income tax, not payroll taxes.
State Taxes May Still Apply
The No Tax on Overtime deduction is federal only. Check your state's tax laws:
States with no income tax (no state impact):
- Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming
States that may conform:
- Check your state's Department of Revenue website
- Most states don't automatically adopt new federal deductions
Below-the-Line Deduction
This is an above-standard-deduction but below-AGI deduction:
- ✅ You can take it WITH the standard deduction
- ❌ It doesn't reduce your AGI
- ❌ Won't help you qualify for AGI-dependent benefits (Roth IRA contributions, education credits, etc.)
How to Claim the Deduction
Filing Requirements
Form needed: Schedule 1A (Additional Deductions and Adjustments)
Steps:
- Get your QOC from employer:
- 2025: Check W-2 box 14 ("Other")
- 2026+: Check W-2 box 12 (code "TT")
- Complete Schedule 1A Part I:
- Enter your MAGI
- Complete Schedule 1A Part III:
- Enter your qualified overtime compensation
- Calculate phase-out (if applicable)
- Determine your deduction
- Transfer to Form 1040:
- Enter total from Schedule 1A on Form 1040 line 13b
- Attach Schedule 1A to your tax return
Filing Tips
Use tax software: Most major tax software (TurboTax, H&R Block, TaxAct) will handle this automatically if you:
- Enter your W-2 correctly
- Report your QOC when prompted
- Answer questions about eligibility
Consider a tax professional if:
- You have multiple W-2s with overtime
- Your income is near the phase-out range
- You're claiming other complex deductions
- You're self-employed with overtime-equivalent income
Frequently Asked Questions
Can I claim this with the standard deduction?
Yes! This is in addition to the standard deduction. You don't need to itemize.
What if my employer didn't report my QOC?
Contact your employer's payroll department. They're required to calculate and report it on your W-2. If they won't, you may need to calculate it yourself with documentation.
Does this apply to salaried employees?
Only if you're non-exempt under the Fair Labor Standards Act (FLSA). Most salaried employees are exempt and don't qualify for overtime, thus don't qualify for this deduction.
What about bonuses or shift differentials?
No. Only time-and-a-half pay for hours over 40/week qualifies. Bonuses, shift differentials, and other premium pay don't count.
Can I claim this for previous years?
The law is retroactive to January 1, 2025. If you filed your 2025 taxes before claiming this deduction, you can file an amended return (Form 1040-X).
Will this deduction be extended beyond 2028?
Unknown. Congress will need to pass legislation to extend it. Given its popularity, extension is likely but not guaranteed.
What if I work two jobs?
All qualified overtime from all W-2s counts toward your deduction, up to the maximum ($12,500 or $25,000).
Maximizing Your Overtime Tax Benefit
Strategy 1: Bunch Overtime in Qualifying Years
If possible, concentrate overtime work in 2025-2028 when the deduction is available.
Example:
- Instead of 5 hours overtime weekly, work 10 hours overtime for half the year
- Same total hours, potentially better tax benefit
Strategy 2: Watch the Phase-out
If your MAGI is near $150,000/$300,000:
- Consider deferring income to 401(k)
- Review HSA contributions
- Time capital gains carefully
Example:
- MAGI: $152,000 (single)
- Contribute $3,000 more to 401(k)
- MAGI drops to $149,000
- Save $200 on phase-out ($2,000 × $100 per thousand)
Strategy 3: Spouse Coordination (Married Filers)
If both spouses earn overtime:
- Combined QOC up to $25,000 deductible
- Watch combined MAGI for phase-out
- File jointly to maximize benefit
Strategy 4: Document Everything
Keep records of:
- Pay stubs showing overtime hours
- Employer's QOC calculation
- Time sheets or time-tracking records
- W-2s and 1099s
Useful if IRS questions your deduction.
Comparison to No Tax on Tips
The same tax law included No Tax on Tips, a similar deduction for tipped workers:
| Feature | No Tax on Overtime | No Tax on Tips |
|---|---|---|
| Max Deduction | $12,500 / $25,000 | $25,000 / $25,000 |
| Phase-out Start | $150K / $300K | $150K / $300K |
| Eligible Income | Time-and-a-half OT pay | Voluntary tips |
| Occupations | All non-exempt workers | Tipped occupations only |
| Can Stack? | No - must choose one | No - must choose one |
You cannot claim both deductions on the same income, but you can claim overtime deduction on OT income and tips deduction on tip income.
Calculate Your Overtime Tax Savings Now
Ready to see exactly how much you'll save? Use our calculator above to:
- Enter your filing status and income
- Input your qualified overtime compensation
- See your exact deduction amount
- Calculate your tax savings
- Compare scenarios
Remember: This deduction is only available through 2028, so take advantage while you can!
Last Updated: January 9, 2026 | Tax Years: 2025-2028 | Source: One Big Beautiful Bill Act (OBBBA), July 2025