Is all time-and-a-half pay tax-free?
No. Only the extra half can be qualified overtime compensation. On a $30 time-and-a-half hour, $20 is straight time and $10 is the premium. The deduction, if the hour is FLSA overtime, is $10.
Time and a half calculator
Ten hours at $20 is $300.00 of time-and-a-half pay. $200.00 is straight time. $100.00 is the extra half, which is the part that can be qualified overtime.
Time-and-a-half pay
$300.00
Time-and-a-half pay is $300.00. The extra half is $100.00.
How the total splits
- Straight time 67%
- Extra half 33%
Pay is 1.5×. Only the extra half can be qualified overtime.
Breakdown
| Time-and-a-half rate | $30.00 |
|---|---|
| Straight time | $200.00 |
| Extra half | $100.00 |
| Time-and-a-half pay | $300.00 |
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Pay = hours × rate × 1.5. Qualified premium = hours × rate × 0.5.
What the extra half is
Time and a half is the straight-time pay plus half of that pay again. The federal deduction, when the hours are FLSA overtime, is only that extra half. The straight-time portion of the overtime check stays in taxable income.
This page does not apply a weekly 40-hour test or a daily test. It prices the hours you type. The overtime pay calculator applies the 40-hour week. State daily overtime, including California, is not calculated.
Worked examples
| Time-and-a-half pay | $300.00 |
|---|---|
| Extra half | $100.00 |
Common questions
Does this include the weekly 40-hour rule?
No. Type the overtime hours themselves. If you have total hours for the week, use the overtime pay calculator, which starts the premium after 40 hours.
What about double time?
Double time is a separate page. Pay is two times the rate. The federal deduction is still only a half-time premium, and only when the Fair Labor Standards Act required the overtime.
Sources
- 26 U.S.C. § 225: qualified overtime compensation — premium only, $12,500 / $25,000 joint cap, $100 phase-out per $1,000 of MAGI, joint-return rule, 2025–2028
- 26 U.S.C. § 224: qualified tips — $25,000 cap and the same MAGI phase-out
- IRS: Treasury, IRS provide guidance for individuals who received tips or overtime during tax year 2025 (FLSA premium, divide-by-3 example)
- IRS Notice 2025-69: qualified tips and qualified overtime compensation
- IRS FAQ: deduction for qualified overtime compensation
- IRS Form 1040-ES (2026): 2026 brackets, standard deduction, and the overtime and tips deduction reminders
- 29 U.S.C. § 207: FLSA overtime after 40 hours in a workweek, at one and one-half times the regular rate