Plain Paycheck

Tax year 2026 · Federal & state tables · Computed in your browser

Federal tax saved, on the overtime premium.

per year · single · 2026 tables

Gross overtime pay
$11,466
Premium portion
$3,822
Deduction allowed
$3,822
Tax saved
$459

The deduction, line by line

Per year
Gross overtime pay (1.5× rate)$11,466.00
Premium portion (the 0.5×, what OBBBA can shield)$3,822.00
Deduction allowed (cap + phase-out applied)$3,822.00
Federal tax saved$458.64

Social Security and Medicare still apply to every overtime dollar. Your paycheck doesn’t change. This arrives when you file.

The math, shown

Gross overtime pay = 1.5 × regular rate × overtime hours × weeks with overtime. The premium portion, the only part IRC §225 lets you deduct, is just the extra half: 0.5 × regular rate × overtime hours × weeks.

That premium is capped at $12,500 a year ($25,000 on a joint return), then reduced by $100 for every completed $1,000 that modified adjusted gross income (MAGI) sits above $150,000 ($300,000 joint), not rounded up for a partial $1,000, so the first reduction doesn't land until MAGI crosses a full $1,000 over the threshold. This calculator approximates MAGI as base wages plus overtime pay, with no other adjustments; your real MAGI may differ slightly if you have other above-the-line items.

The federal tax saved is the difference between tax on your income with and without that deduction subtracted, computed on the same 2026 brackets and standard deduction as every other calculator on this site, after the deduction is applied on top of the standard deduction. Married filing separately cannot claim this deduction at all: IRC §225 requires a joint return for married taxpayers, so the allowed amount is $0 in that filing status regardless of income.

Social Security and Medicare apply to every overtime dollar, premium included. This is strictly an income-tax deduction, and it arrives as a bigger refund or smaller balance due when you file on Schedule 1-A, not as a bigger paycheck today.

Quick answers

Is overtime tax-free now?
No. The One, Big, Beautiful Bill Act created a temporary federal deduction (2025–2028) for the premium half of FLSA-required overtime, not an exemption. It's capped at $12,500 ($25,000 filing jointly), phases out above $150,000/$300,000 of modified AGI, and Social Security and Medicare are withheld on every overtime dollar regardless. The deduction shows up when you file, not in the paycheck itself.
Does my state tax overtime?
This calculator computes only the federal deduction under IRC §225. States set their own rules and most have not created a matching state-level deduction, so state income tax (where it applies) still falls on the full overtime wage. Check your state's income-tax page for its own treatment.
Do I need to itemize to claim it?
No. The deduction is available whether you itemize or take the standard deduction. It's a new below-the-line deduction claimed on Form 1040 Schedule 1-A that stacks on top of the standard deduction, not a replacement for it.
Does the deduction apply to the whole overtime paycheck?
No, only to the premium portion. If overtime pays 1.5× your regular rate, the deductible amount is just the extra 0.5×, the part FLSA requires above straight-time pay. The base 1.0× portion of overtime hours is taxed exactly like regular wages.

Sources