Regular Pay
$52,000
Overtime Premium (Deductible)
$6,500
Deduction Applied
$6,500
Total Tax Savings
$1,280
What qualifies as overtime under the OBBBA provision?
Only hours that qualify as overtime under the Fair Labor Standards Act (FLSA) are eligible. That means hours worked beyond 40 in a single workweek, paid at the 1.5x overtime rate. Voluntary extra shifts, double-time pay, or hours that don't meet the FLSA definition do not qualify.
Is all my overtime pay deductible?
No. Only the overtime premium portion is deductible -- that is, the extra 0.5x above your regular hourly rate. If your regular rate is $25/hour, your overtime rate is $37.50/hour but only the $12.50 premium per hour is eligible for the deduction. The base $25/hour for overtime hours is still fully taxable.
What is the $12,500 / $25,000 cap?
The OBBBA caps the overtime premium deduction at $12,500 for single filers and $25,000 for married filing jointly. Any overtime premium above these limits remains fully taxable. This cap applies to the total deduction for the tax year.
What is the MAGI phaseout?
If your Modified Adjusted Gross Income (MAGI) exceeds $150,000 for single filers or $300,000 for married filing jointly, the overtime deduction is completely phased out and you receive no tax benefit. There is no partial phaseout -- you either qualify in full or not at all.
Does FICA still apply to overtime pay?
Yes. The OBBBA overtime deduction only applies to federal and state income taxes. Social Security (6.2%) and Medicare (1.45%) taxes still apply to the full overtime pay amount, including the premium portion. The deduction does not reduce your FICA obligation.
When does this provision expire?
The No Tax on Overtime provision was enacted as part of the One Big Beautiful Bill Act (OBBBA) and is set to sunset at the end of 2028. Unless Congress extends or makes it permanent, the deduction will no longer be available starting in tax year 2029.
OBBBA-Aligned: Based on the One Big Beautiful Bill Act overtime premium deduction provisions. Only the FLSA-qualifying overtime premium (0.5x) is deductible, subject to annual caps and MAGI phaseout. FICA taxes still apply to all overtime pay.
Disclaimer: This calculator provides estimates based on current IRS rates and thresholds for the 2025 tax year. It does not constitute professional tax, financial, or legal advice. Your actual liability may differ depending on your filing status, state of residence, deductions, and individual circumstances. Always consult a qualified tax professional or CPA before making financial decisions. Read our terms
This calculator uses official rates and thresholds from:
- IRS — One Big Beautiful Bill: No Tax on Overtime
- IRS — OBBBA Tax Deductions for Working Americans
- DOL — FLSA Overtime Pay Requirements
- Revenue Procedure 2024-40 — Inflation Adjustments for 2025
Last verified: April 2026 · Tax year 2026. Results are indicative — consult a qualified accountant for personalised advice.