No tax on overtime explained

No tax on overtime is a deduction for the extra half of time-and-a-half, not for the whole overtime check. The cap is $12,500, or $25,000 on a joint return. It applies to tax years 2025 through 2028. Use the no tax on overtime calculator for a dollar result.

Who can claim it

The premium has to be qualified overtime compensation: the amount the Fair Labor Standards Act requires above the regular rate, generally after 40 hours in a workweek. An exempt employee does not have that premium. A married person who files separately cannot claim the deduction. A couple files jointly or not at all.

Caps and the phase-out

Modified AGI over $150,000, or over $300,000 on a joint return, reduces the deduction by $100 for each full $1,000 over the line. One dollar past a thousand-dollar step does not reduce it. The next full thousand does.

What stays taxed

Straight time stays taxable. Social Security and Medicare still apply to the wages. State income tax is not in this site's rate file, so there is no state-by-state table. A daily overtime rule, a seventh-day rule, and double time required only by a contract are not calculated. The qualified overtime page is the yes-or-no check.

The how much is tax-free page turns a weekly habit into the annual deduction. Time and a half prices the hours.