No Tax on Overtime Deduction Calculator
Calculate your federal "No Tax on Overtime" deduction for 2026. Only the FLSA-required premium ("half" of time-and-a-half) qualifies -- up to $12,500 single or $25,000 joint, with the MAGI phase-out applied automatically.
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2026 No Tax on Overtime Deduction
$5,000.00
Estimated • Based on your inputs
Detailed Breakdown
Disclaimer: This calculator provides estimates for informational purposes only. Results should not be considered financial, tax, or legal advice. Consult a qualified professional for your specific situation.
How This Calculator Works
Calculation methodology and assumptions
The "No Tax on Overtime" deduction (26 U.S.C. Sec. 225), created by the One Big Beautiful Bill Act for tax years 2025 through 2028, is the most commonly misunderstood of the new OBBBA deductions because it does NOT cover your entire overtime paycheck -- only the "premium" portion required under Section 7 of the Fair Labor Standards Act (FLSA): the "half" in "time-and-a-half," not the base hourly rate you'd have earned anyway. Per the IRS's own worked examples (IR-2025-114), if your pay stub shows a combined "overtime" line that blends your regular rate with the FLSA premium, you generally divide by 3 (at the standard 1.5x rate) or by 4 (if your employer voluntarily pays double time, 2x) to find your qualified overtime compensation -- because the required premium in dollar terms is fixed at half your regular rate no matter how generously your employer actually pays. The maximum deduction is $12,500 for single/head-of-household filers and $25,000 for joint filers, reduced by $100 for every $1,000 your MAGI exceeds $150,000 ($300,000 joint) -- fully eliminated at $275,000 MAGI (single) or $550,000 MAGI (joint). Independent contractors, 1099 workers, and most salaried "exempt" employees don't qualify because the FLSA doesn't require overtime pay for them in the first place. Married taxpayers must file jointly to claim any deduction (Sec. 225(e)). Like the tips deduction, this does not reduce FICA taxes or your AGI -- only your federal income tax on the qualified portion.
How to Use This "No Tax On..." Deduction Calculator Calculator
- 1
Enter your information
Input the required values. The calculator is pre-filled with your state's data where applicable — adjust to match your specific situation for accurate results.
- 2
Review default values
Check that the pre-filled state-specific data (tax rates, median values, etc.) matches your local situation. You can override any value to customize the calculation.
- 3
Analyze your results
Review the calculated outputs. Use the breakdown table to understand exactly how each factor contributes to the final result.
- 4
Compare across states
Use the related state calculators linked below to compare results across different states — useful for relocation planning and financial comparison.
Example Calculation
Here's a practical example using this state's data.
The calculator uses state-specific public data and documented estimates where available — including tax rates, median values, and cost benchmarks — to produce a personalized estimate for the inputs you provide.
Result: Results will vary based on your individual inputs. Use this calculator as a starting point, then adjust the values to test different scenarios. The methodology section below explains exactly how each result is calculated.
What Affects Your Results
State-Specific Inputs
Each state has unique rates, fee schedules, and regulatory requirements that can affect results. This page's methodology and source card identify which inputs are sourced, modeled, or user-adjustable.
Income Level
Many calculations are income-dependent due to progressive tax brackets, phase-outs, or income-based eligibility thresholds. Higher income doesn't always mean proportionally higher costs.
Local Variations
State averages may not reflect your specific city or county. Local taxes, fees, and market conditions can vary ±20% from state averages.
Annual Changes
Tax rates, fee schedules, and regulations change. Check the recorded source-review date and verify critical numbers with the relevant agency.
Tips & Best Practices
- Always verify pre-filled values against your actual data. State averages are a good starting point but your situation may differ significantly.
- Run multiple scenarios by adjusting key inputs to see how changes affect your results. This helps with planning and decision-making.
- Compare your results across states using the related calculators linked below — especially valuable if you're considering relocating or doing business in another state.
- Bookmark this page to recalculate periodically as rates change. Check the page source card and review date before relying on a pre-filled value.
- Consult a qualified professional for major financial decisions. These calculators provide estimates based on standard formulas — a CPA or financial advisor can factor in your complete financial picture.
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StateCalc Team
Editorial Team
The StateCalc team builds free financial calculators using data from official government sources including the IRS, U.S. Census Bureau, BLS, and state revenue departments. All formulas are validated by an automated test suite and cross-referenced against published data.
Our editorial standardsFrequently Asked Questions
Does my entire overtime paycheck qualify for the No Tax on Overtime deduction?
No -- this is the single most common misunderstanding. Only the FLSA-required "premium" portion qualifies: the extra "half" in "time-and-a-half" pay, not your regular hourly rate for those hours. If your pay stub shows a combined overtime total of, say, $15,000 paid at the standard 1.5x rate, only about $5,000 (one-third) is "qualified overtime compensation" eligible for the deduction -- per the IRS's own worked example in IR-2025-114.
What is the maximum No Tax on Overtime deduction?
For tax years 2025 through 2028, the maximum deduction is $12,500 for single or head-of-household filers, or $25,000 for married couples filing jointly, per 26 U.S.C. Section 225(b)(1). It phases out by $100 for every $1,000 your MAGI exceeds $150,000 ($300,000 joint), reaching zero at $275,000 MAGI (single) or $550,000 MAGI (joint).
What if my employer pays double time instead of time-and-a-half?
You still only get to deduct the FLSA-REQUIRED premium, not whatever extra your employer voluntarily pays. Per the IRS's "Brad" example, if an employer pays double time (2x) and reports $20,000 of overtime, only $5,000 (one-quarter) qualifies -- because the FLSA only requires time-and-a-half, so the dollar value of the "required" premium is the same as it would be at 1.5x, it's just a smaller share of a bigger total.
Who does NOT qualify for the No Tax on Overtime deduction?
Independent contractors and self-employed (1099) workers never qualify, since the FLSA overtime requirement only applies to employees. Most salaried "exempt" employees also don't qualify -- if the FLSA doesn't require your employer to pay you overtime in the first place, any extra pay you receive isn't "qualified" no matter what it's labeled on your pay stub. You also need a valid Social Security number, and married taxpayers must file jointly.
Will my W-2 separately show my qualified overtime amount?
Not for the 2025 tax year -- employers were not required to separately break out qualified overtime on 2025 W-2s, though some voluntarily reported it in Box 14. Starting with tax year 2026, W-2 and 1099 reporting requirements change so that qualified overtime compensation must be separately stated. Until then, the IRS's Notice 2025-69 and the Schedule 1-A instructions provide calculation methods like the one this calculator uses.
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