1.5xTime and a Half Calculator

No Tax on Overtime Calculator

The 2025 federal law lets eligible workers deduct the premium portion of overtime pay for tax years 2025–2028. Estimate your deduction and what it saves you.

Filing status
Estimated federal income tax savings
$1,100
per year at a 22% marginal rate
Total overtime pay (1.5x)
$15,000.00
Qualified premium portion (0.5x)
$5,000.00
Estimated deduction
$5,000
Cap: $12,500 (single)

Estimate only, not tax advice. Assumes all overtime is FLSA-required time and a half; only the 0.5x premium above your regular rate is deductible (2025–2028). Social Security, Medicare, and state income taxes still apply to overtime pay.

How this estimate works

  • Deduction applies to the 0.5x premium above your regular rate on FLSA-required time-and-a-half overtime — not the whole overtime check.
  • Caps: $12,500 per year single, $25,000 married filing jointly.
  • Phase-out: reduced by $100 for each $1,000 of modified AGI over $150,000 (single) / $300,000 (joint).
  • Assumes all entered overtime is FLSA-required at exactly 1.5x. If some of your overtime comes only from a contract or state daily rule, your qualified amount may be lower — your W-2 is the authoritative number.

Sources: IRS fact sheet FS-2025-03 and IRS guidance IR-2025-114. Estimate only — not tax advice.

What “no tax on overtime” really means

The One Big Beautiful Bill Act, signed July 4, 2025, created a new federal income tax deduction for qualified overtime compensation — the pay that exceeds your regular rate when the Fair Labor Standards Act requires time and a half. In plain terms: if you earn $20/hour and $30/hour on overtime, only the extra $10/hour (the “half” in time and a half) is deductible. The name oversells it a little; it's a meaningful deduction on part of your overtime, not tax-free overtime.

Who can claim it

  • Workers who receive FLSA-required overtime reported by their employer (W-2 employees; certain 1099 cases have their own reporting).
  • Both itemizers and non-itemizers — you don't give up the standard deduction.
  • You must include a Social Security number on your return, and married couples must file jointly.
  • Exempt employees (no FLSA overtime) and overtime that's purely contractual or state-mandated beyond the FLSA generally don't generate a qualified amount.

A worked example

Maria earns $25/hour and averages 8 overtime hours a week for 50 weeks in 2025. Her overtime pay is $37.50/hour × 8 × 50 = $15,000. The qualified premium portion is $12.50/hour × 8 × 50 = $5,000 — under the $12,500 cap, so she deducts the full $5,000. In the 22% bracket, her federal income tax drops by about $1,100. Her paycheck withholding, Social Security, and Medicare don't change — the benefit arrives when she files.

Where to find your number at tax time

Employers must report qualified overtime compensation for the year. For tax year 2025, the IRS allowed transition approaches, and many payroll providers used W-2 Box 14 (often labeled something like “FLSA OT Prem”). If no qualified amount appears on your W-2, ask payroll before assuming you have none — but the reported figure, not a calculator, is what goes on your return. This tool is for planning: deciding whether extra overtime shifts are worth it, and roughly sizing your refund.

Keep the rest of the math straight

Your gross overtime pay is still computed the normal way — see the time and a half calculator for the quick rate math or the overtime calculator for a full paycheck view. State income tax treatment varies by state (some conform to the federal deduction, some don't), so check your state's revenue department when you file.

Frequently asked questions

Is overtime actually tax-free now?
No. 'No tax on overtime' is a federal income tax deduction, not an exemption. Only the premium portion of FLSA overtime — the extra 0.5x above your regular rate — is deductible, up to $12,500 per year ($25,000 for joint filers). Social Security and Medicare taxes still apply to all overtime, and most states still tax it too.
What counts as qualified overtime compensation?
Overtime required by section 7 of the Fair Labor Standards Act — the amount paid above your regular rate. Overtime that only exists because of a contract, union agreement, or state daily rule (and isn't FLSA-required) generally does not qualify. Your W-2 reports the qualified amount; for 2025 many employers use Box 14 with a code like 'FLSA OT Prem.'
How much is the deduction worth in dollars?
Multiply your deductible amount by your marginal tax rate. Example: $25/hour with 8 overtime hours a week for 50 weeks earns $15,000 in overtime pay, of which the 0.5x premium is $5,000. At a 22% marginal rate, that's about $1,100 less federal income tax.
Do I have to itemize to claim it?
No. The deduction is available whether you itemize or take the standard deduction. You do need a Social Security number on your return, and married taxpayers must file jointly to claim it.
What are the income limits?
The deduction shrinks by $100 for every $1,000 of modified adjusted gross income above $150,000 (single) or $300,000 (married filing jointly), and can phase out entirely at higher incomes.
When does it start and end?
It applies to tax years 2025 through 2028, retroactive to January 1, 2025. Under current law it expires after the 2028 tax year.
Does my employer still withhold taxes on overtime?
Generally yes — paychecks can look unchanged. The benefit shows up when you file your federal return and claim the deduction, which for many workers means a larger refund.