No Tax on Overtime Calculator

How This Works

The no-tax-on-overtime deduction allows qualifying workers to exclude overtime pay from their federal taxable income. This calculator estimates how much less federal income tax you owe and how much extra take-home pay you receive as a result.

Your Overtime Details

Hourly Rate ($)

Overtime Hours / Week

Weeks of Overtime / Year

Federal Tax Bracket

Overtime Multiplier

Your No-Tax-on-Overtime Savings

Annual Overtime Pay

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Federal Tax Saved

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Extra Take-Home / Year

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Note: This is an estimate based on your selected federal tax bracket. Actual savings depend on your full tax situation, applicable income caps, state tax rules, and final IRS guidance. FICA taxes (Social Security and Medicare) still apply to overtime pay and are not affected by this deduction.

About the No-Tax-on-Overtime Deduction

The One Big Beautiful Bill Act, signed in July 2025, established a federal deduction for overtime wages. Qualifying workers — generally non-exempt hourly employees and salaried workers who receive FLSA overtime — can deduct overtime pay from their federal taxable income.

The deduction is for federal income tax only. Social Security (6.2%) and Medicare (1.45%) taxes still apply to all earned wages including overtime. State income tax treatment varies by state.

For tax year 2025, workers will claim the deduction on their federal tax return filed in early 2026. For later years, updated IRS withholding guidance should allow employers to reduce withholding on overtime pay during the year so workers see the benefit in each paycheck.

Frequently Asked Questions

What counts as overtime for this deduction? +

The deduction applies to overtime compensation paid under the Fair Labor Standards Act — the premium pay for hours worked beyond 40 in a workweek. This is the overtime portion (the extra 0.5× or more above regular pay), not your full wages for overtime hours.

Does the deduction reduce FICA taxes? +

No. Social Security (6.2%) and Medicare (1.45%) taxes apply to all earned income including overtime. The deduction only reduces federal income tax.

Are there income limits for the deduction? +

Yes, the legislation includes income caps to target the benefit at middle-income workers. High earners above the threshold do not qualify for the full deduction. Check the latest IRS guidance for the specific thresholds.