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Tax Planning12 min readJuly 8, 2025

No Tax on Overtime Calculator: Complete Guide to Tax Savings (2025-2028)

Comprehensive guide to the No Tax on Overtime provision. Learn how to calculate potential federal tax savings, understand income limits, and maximize your overtime tax deduction.

What is the No Tax on Overtime Provision?

The No Tax on Overtime provision, part of the One Big Beautiful Bill Act, represents one of the most significant changes to overtime taxation in decades. This temporary measure allows eligible workers to deduct federal income taxes on the premium portion of their overtime pay for tax years 2025-2028.

🎯 Key Features

  • Effective Period: Tax years 2025-2028 only
  • Maximum Deduction: $12,500 (single) or $25,000 (married filing jointly)
  • Income Limits: Phase-out begins at $150K (single) or $300K (married)
  • Premium Only: Only the 0.5x premium portion is deductible

Understanding Overtime Premium vs. Total Pay

This distinction is crucial for accurate calculations. Many workers mistakenly believe their entire overtime pay is deductible, but the law specifically targets only the premium portion.

📊 Example Calculation

If you earn $20/hour regular pay:

  • • Regular overtime rate: $30/hour (1.5x)
  • • Premium portion: $10/hour (0.5x)
  • Only the $10/hour premium is deductible

Annual Premium Example:

$10 × 10 hrs/week × 50 weeks = $5,000 deductible

Who Qualifies for the Deduction?

👤 Single Filers

Full deduction: MAGI up to $150,000

Phase-out: $150,001 - $200,000

No deduction: MAGI above $200,000

👫 Married Filing Jointly

Full deduction: MAGI up to $300,000

Phase-out: $300,001 - $350,000

No deduction: MAGI above $350,000

Real-World Examples

🏥 Healthcare Worker Example

Background:

  • • Regular rate: $28/hour
  • • Weekly overtime: 12 hours
  • • Weeks worked: 50
  • • MAGI: $85,000

Tax Savings:

  • • Premium: $28 × 0.5 × 12 × 50 = $8,400
  • • Marginal rate: 22%
  • Annual savings: $1,848

🏭 Manufacturing Supervisor Example

Background:

  • • Regular rate: $35/hour
  • • Weekly overtime: 10 hours
  • • Weeks worked: 52
  • • Combined MAGI: $185,000 (married)

Tax Savings:

  • • Premium: $35 × 0.5 × 10 × 52 = $9,100
  • • Marginal rate: 24%
  • Annual savings: $2,184

Strategic Planning Tips

💡 Maximize Your Benefit

  • Track Hours Carefully: Maintain detailed overtime records
  • Consider Timing: Plan overtime work within income limits
  • Plan Other Income: Consider impact of bonuses on MAGI
  • Coordinate with Spouse: Optimize combined income strategy

📋 Essential Records

  • • Pay stubs with overtime hours and rates
  • • W-2 forms with overtime pay details
  • • Time tracking records
  • • Employment contracts specifying rates

Common Misconceptions

❌ "All Overtime Pay is Deductible"

Reality: Only the premium portion (0.5x regular rate) is deductible, not the entire 1.5x overtime payment.

❌ "It Reduces All Taxes"

Reality: The deduction only affects federal income tax, not Social Security, Medicare, or state taxes.

❌ "It's Permanent"

Reality: The provision only applies to tax years 2025-2028 unless extended by Congress.

Economic Impact and Considerations

📈 Key Statistics

Projected Cost: $124 billion through 2028 (Congressional Budget Office)

Average Savings: $1,400-$1,750 for typical overtime workers (White House estimate)

Temporary Nature: Policy expires after 2028 unless extended

Federal Only: State tax treatment varies by state

Using Our Calculator Effectively

Our No Tax on Overtime Calculator helps you estimate potential savings with advanced features including income phase-out calculations and marginal tax rate analysis.

🧮 Calculate Your Savings

Get personalized estimates with our comprehensive calculator featuring real-time calculations, URL sharing, and detailed breakdowns.

Start Calculating Now →

External Resources

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