Annual Overtime Tax Savings Calculator
Find out how much the No Tax on Overtime law (P.L. 119-21) puts back in your pocket. Accounts for deduction caps and income phase-outs.
Annual Overtime Tax Savings Calculator
Annual Overtime Compensation
Total overtime pay earned in a year, assumed paid at 1.5x. Only the 0.5x premium inside it is deductible — one third of what you enter.
Filing Status
Your federal tax filing status as reported on your IRS Form 1040.
FLSA-Covered Employee
Are you a non-exempt hourly worker eligible for time-and-a-half overtime pay?
Adjusted Gross Income (AGI)
Line 11 of your IRS Form 1040. The phase-out technically runs on modified AGI, which equals AGI for most filers.
Estimates only. Consult a tax professional for accuracy.
Important Notes
- FLSA-covered employees only (hourly workers eligible for time-and-a-half)
- Only the 0.5x premium on FLSA-required overtime (over 40 hrs/week) is deductible
- Temporary: Tax years 2025-2028 only
- Income tax savings only — Social Security and Medicare still apply to overtime
- Married Filing Separately filers are not eligible (P.L. 119-21 Sec. 225(e))
- SSN required on tax return
Track Your Overtime Automatically
Stop guessing what you'll take home. The app calculates overtime across multiple jobs and shows your pay after taxes.
Understanding the No Tax on Overtime Law
What P.L. 119-21 Does
Section 70202 of P.L. 119-21 — the "One Big Beautiful Bill" — added a new above-the-line deduction to the Internal Revenue Code (Section 225). Eligible workers can subtract qualified overtime compensation from their taxable income, which means no federal income tax on that portion of their pay.
Only the Premium Is Deductible
Section 225 covers the pay you receive in excess of your regular rate because the FLSA requires it — the 0.5x premium, not the whole 1.5x wage. On overtime paid at time-and-a-half, two thirds of the check is straight-time wage and only the remaining third is deductible. Enter your total overtime compensation above and the calculator takes the one-third premium from it.
Only hours the FLSA itself requires to be paid at a premium — hours past 40 in a workweek — count. State daily overtime (California's 8-hour rule, for instance), contractual overtime after 35 or 8 hours, and holiday double time qualify only where those same hours also exceed 40 in the week, and even then only the 0.5x-of-regular-rate slice qualifies.
Who Qualifies
You need to be FLSA-covered to claim this deduction — in practice, that means non-exempt hourly workers who get time-and-a-half under the Fair Labor Standards Act. Salaried exempt employees don't qualify, no matter how many hours they put in. Neither do independent contractors or the self-employed. You also need a valid Social Security number on the return.
The Deduction Cap and Phase-Out
Single and head-of-household filers can deduct up to $12,500 a year; married filing jointly, up to $25,000. These are annual caps — there is no weekly or per-paycheck limit. Above $150,000 modified AGI (single) or $300,000 (MFJ), the deduction shrinks by $100 for every full $1,000 you earn over the threshold. At $275,000 (single) or $550,000 (MFJ), the deduction hits zero. Married filing separately is ineligible entirely.
What It Doesn't Cover
This is a federal income tax deduction only. You still owe Social Security (6.2%) and Medicare (1.45%) on all overtime pay. Tips have their own separate deduction under IRC Sec. 224. State taxes are unaffected unless your state passes its own version of the law.
The Sunset
The deduction is temporary — it covers tax years 2025 through 2028. After December 31, 2028, overtime goes back to being fully taxable at the federal level unless Congress votes to extend it.
Frequently Asked Questions
Common questions about annual overtime tax savings calculator
What is the "No Tax on Overtime" law?
Section 70202 of P.L. 119-21 added an above-the-line deduction (IRC Section 225) that lets eligible workers deduct the overtime premium from their federal taxable income. Only the premium the FLSA requires above your regular rate qualifies — the 0.5x half, not the full 1.5x wage. On overtime paid at time-and-a-half, that's one third of your overtime compensation, subject to annual caps and income phase-outs.
How much can I save on overtime taxes?
It depends on how much overtime you earn, your filing status, and which tax bracket you're in. Start with the deductible premium — one third of overtime paid at 1.5x — then apply the annual cap of $12,500 (single) or $25,000 (married filing jointly). Multiply the qualifying deduction by your marginal rate: a $10,000 deduction in the 22% bracket saves $2,200 in federal taxes.
Does this eliminate all taxes on overtime?
No. It only covers federal income tax. You'll still pay Social Security (6.2%) and Medicare (1.45%) on every dollar of overtime. State income taxes aren't affected either, unless your state adopts a matching deduction.
Who is eligible for the overtime tax deduction?
Hourly workers who are non-exempt under the FLSA — the ones who get time-and-a-half for overtime. If you're salaried and classified as exempt, or if you're an independent contractor or self-employed, you can't claim it.
When does the overtime tax deduction expire?
It covers tax years 2025 through 2028. Once 2028 ends, overtime goes back to being fully taxable at the federal level — unless Congress decides to renew it.
What if my income is too high for the full deduction?
The deduction starts shrinking once your modified AGI (MAGI) passes $150,000 (single) or $300,000 (MFJ). It drops by $100 for every full $1,000 over the threshold. By $275,000 (single) or $550,000 (MFJ), the deduction is gone entirely. For most filers MAGI equals the AGI on line 11 of Form 1040.
What is the One Big Beautiful Bill Act?
It's the common name for Public Law 119-21, which was signed in 2025. Among other things, Title VII created above-the-line deductions for overtime pay, tips, and auto loan interest. This calculator focuses on the overtime deduction from Section 70202.