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Quick answer
Overtime is taxed like regular pay: your federal bracket, 7.65% Social Security and Medicare, and any state tax. For 2025–2028, the no tax on overtime deduction lets non-exempt workers deduct the premium half of time-and-a-half, up to $12,500 ($25,000 joint), on their tax return. Example: $25/hr with 10 overtime hours earns $375.00 a week, about $291.70 after withholding; over 26 weeks the $3,250 deduction saves about $390.
Last updated: · Sources: IRS Notice 2025-69, IRS overtime Q&A (Aug. 2026), Rev. Proc. 2025-32. Guides: how overtime is taxed · how much overtime is tax free. Just need overtime pay without taxes? Use the overtime calculator.
Overtime you take home (weekly paycheck)
$291.70
of $375.00 gross overtime — you keep 77.8%
If your employer pays overtime as a separate check, federal withholding may be a flat 22% ($82.50). Your paycheck withholding does not subtract the overtime deduction unless you file a 2026 Form W-4 that claims it.
Estimate using 2026 IRS brackets and the standard deduction. Not tax advice. For 2026 you can deduct only the qualified overtime your employer reports in W-2 box 12, code TT.
Weekly pay, 2026 brackets, no state tax, 26 weeks of overtime in the year. Computed by the calculator above.
| Scenario | OT pay / week | OT take-home / week | Overtime deduction | Tax saved at filing |
|---|---|---|---|---|
| $20/hr, 40 + 8 OT hours, single | $240.00 | $192.84 (80.4%) | $2,080 | $250 |
| $25/hr, 40 + 10 OT hours, single | $375.00 | $291.70 (77.8%) | $3,250 | $390 |
| $30/hr, 40 + 15 OT hours, married | $675.00 | $542.36 (80.3%) | $5,850 | $702 |
| $22/hr, 40 + 12 h double time, single | $528.00 | $411.33 (77.9%) | $3,432 | $412 |
The One Big Beautiful Bill Act (signed July 4, 2025) added a federal deduction for qualified overtime compensation — the part of FLSA-required overtime pay above your regular rate.
| Situation | Deductible? | Example at $20/hr |
|---|---|---|
| Time and a half for hours over 40 in a week | Premium only | 10 h × $10 premium = $100 deductible of $300 overtime pay |
| Double time for hours over 40 | Premium only | Only the FLSA $10/hr premium: $100 of $400 (IRS example) |
| Daily overtime (over 8 h/day) in a week of 40 h or less | No | Not FLSA overtime — fully taxable |
| Weekend, holiday, or union-contract premium beyond the FLSA | No | Only the FLSA-required amount, if any, qualifies |
| Exempt salaried employee paid overtime by policy | No | Not owed overtime under the FLSA |
| Straight-time pay for overtime hours | No | The $20 base part of each hour is taxable |
Time-and-a-half FLSA overtime, no state tax, under the Social Security wage base ($184,500 in 2026). One-third of time-and-a-half pay is the deductible premium.
| Federal bracket | Federal tax (no deduction) | Federal tax (with deduction) | Social Security + Medicare | You keep (with deduction) |
|---|---|---|---|---|
| 10% | $100.00 | $66.67 | $76.50 | $856.83 (was $823.50) |
| 12% | $120.00 | $80.00 | $76.50 | $843.50 (was $803.50) |
| 22% | $220.00 | $146.67 | $76.50 | $776.83 (was $703.50) |
| 24% | $240.00 | $160.00 | $76.50 | $763.50 (was $683.50) |
| 32% | $320.00 | $213.33 | $76.50 | $710.17 (was $603.50) |
| Wage | 1.5× | 2× | Deductible / OT hr | 10 h at 1.5× |
|---|---|---|---|---|
| $15.00 | $22.50 | $30.00 | $7.50 | $225.00 |
| $18.00 | $27.00 | $36.00 | $9.00 | $270.00 |
| $20.00 | $30.00 | $40.00 | $10.00 | $300.00 |
| $22.00 | $33.00 | $44.00 | $11.00 | $330.00 |
| $25.00 | $37.50 | $50.00 | $12.50 | $375.00 |
| $28.00 | $42.00 | $56.00 | $14.00 | $420.00 |
| $30.00 | $45.00 | $60.00 | $15.00 | $450.00 |
| $35.00 | $52.50 | $70.00 | $17.50 | $525.00 |
| $40.00 | $60.00 | $80.00 | $20.00 | $600.00 |
| $50.00 | $75.00 | $100.00 | $25.00 | $750.00 |
The reduction is subtracted from your own capped amount. Joint filers: double every income figure.
| MAGI | Reduction | With $12,500 qualified | With $6,000 qualified |
|---|---|---|---|
| $150,000 | $0 | $12,500 | $6,000 |
| $160,000 | $1,000 | $11,500 | $5,000 |
| $175,000 | $2,500 | $10,000 | $3,500 |
| $200,000 | $5,000 | $7,500 | $1,000 |
| $225,000 | $7,500 | $5,000 | $0 |
| $250,000 | $10,000 | $2,500 | $0 |
| $275,000 | $12,500 | $0 | $0 |
Standard deduction: $16,100 single, $32,200 married filing jointly, $24,150 head of household (2025: $15,750 / $31,500 / $23,625). Source: IRS Rev. Proc. 2025-32.
| Rate | Single | Married filing jointly | Head of household |
|---|---|---|---|
| 10% | $0–$12,400 | $0–$24,800 | $0–$17,700 |
| 12% | $12,400–$50,400 | $24,800–$100,800 | $17,700–$67,450 |
| 22% | $50,400–$105,700 | $100,800–$211,400 | $67,450–$105,700 |
| 24% | $105,700–$201,775 | $211,400–$403,550 | $105,700–$201,750 |
| 32% | $201,775–$256,225 | $403,550–$512,450 | $201,750–$256,200 |
| 35% | $256,225–$640,600 | $512,450–$768,700 | $256,200–$640,600 |
| 37% | Over $640,600 | Over $768,700 | Over $640,600 |
Overtime pay = hourly rate × 1.5 × overtime hours
Payroll taxes = overtime pay × 7.65% (+ state rate)
Qualified overtime = hourly rate × 0.5 × hours over 40 per week
Deduction = min(qualified overtime, $12,500 or $25,000) − $100 × full $1,000s of MAGI over $150,000 / $300,000
Federal tax on overtime = bracket rate × (overtime pay − deduction)
In the 12% bracket, $1,000 of time-and-a-half overtime now costs about $156.50 in federal and payroll tax (you keep $843.50); in the 22% bracket, about $223.17 (you keep $776.83).
Earn tips too? Estimate the companion deduction with the tip income tax calculator.
Get Custom Calculator for Your BusinessHelp coworkers see what that extra shift really pays — and what they can deduct.
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