Overtime tax calculator
How much of your overtime you actually keep — including the federal overtime deduction, its cap, its phase-out, and the payroll tax that never goes away.
Quick answer
Overtime is not fully tax free. Only the premium half of time-and-a-half is deductible from federal income tax, capped at $12,500 (single) or $25,000 (joint) a year. At $28/hour and 10 overtime hours a week you earn $21,840 in overtime, of which $7,280 is deductible premium — FICA and state income tax still apply to all of it.
Overtime pay and tax
The deduction applies to federal income tax only — Social Security, Medicare and state income tax are still withheld on every overtime dollar, and time-and-a-half means only the extra half is deductible.
How the maths works
Stated plainly, so you can check it.
- Overtime pay = wage × multiplier × hours × 52 weeks.
- Deductible premium = wage × (multiplier − 1) × hours × 52, capped at $12,500 or $25,000.
- Phase-out: the cap falls $100 per $1,000 of income above $150,000 single / $300,000 joint.
- Federal tax saved = deduction × your marginal rate. FICA of 7.65% applies to the full overtime amount.
- This is an estimate for planning, not tax advice — brackets, credits and withholding tables vary.
Overtime tax FAQ
The questions people actually ask.
- Is overtime really tax free?
- No. Only the premium half of time-and-a-half is deductible from federal income tax, up to $12,500 for single filers and $25,000 for joint filers per year. Social Security, Medicare and state income tax are still withheld on every overtime dollar.
- How much overtime pay is deductible?
- The premium portion only. At $28 an hour and time-and-a-half, an overtime hour pays $42, of which $14 is premium. Ten overtime hours a week is $7,280 of premium pay a year — all of it under the cap.
- Does the deduction phase out?
- Yes. Once modified adjusted gross income passes $150,000 (single) or $300,000 (joint), the deduction drops by $100 for every $1,000 of income above the threshold.
- Do I still pay Social Security and Medicare on overtime?
- Yes. FICA is 7.65% of overtime wages regardless of the income tax deduction, and employers withhold it on the full amount.
- Does my state tax overtime?
- Most states with an income tax treat overtime as ordinary wages, so the federal deduction does not carry over automatically. Enter your state rate in the calculator to see the effect.
Sources & transparency
- IRS — deduction for qualified overtime compensation — cap, phase-out thresholds and the premium-only rule for tax years 2025-2028
- US Department of Labor — Fair Labor Standards Act overtime — time-and-a-half above 40 hours in a workweek
Last reviewed August 2026. Figures are published for reference and can change; verify with the source agency before filing or contracting. How we build and check this data.
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