Tax year 2026
Overtime calculator
See what your overtime hours are worth after tax, and how much the federal overtime deduction saves you.
That overtime adds about $14,399 a year to your take-home pay, or $34.61 for each overtime hour.
| For the year | No overtime | With overtime | Difference |
|---|---|---|---|
| Gross pay | $58,240 | $75,712 | +$17,472 |
| Federal income tax | $4,809 | $6,545 | +$1,737 |
| Social Security and Medicare | $4,455 | $5,792 | +$1,337 |
| Take-home pay | $48,976 | $63,375 | +$14,399 |
| Kept of every $100 | $84.09 | $83.70 | −$0.39 |
From 2025 through 2028 the premium part of overtime pay (the extra half in time-and-a-half) can be deducted on the federal return, up to $12,500 a year ($25,000 for a joint return), shrinking above $150,000 of income ($300,000 joint). Social Security and Medicare still apply to all overtime pay. Some states follow the federal deduction and most do not; the state figures here use the rule for the state you chose. Your employer may keep withholding as before, in which case the saving arrives as a refund.
Estimate for tax year 2026. Your real paycheck depends on your W-4, your benefits and your employer's payroll system. This is education, not tax, payroll or financial advice.
How overtime pay is taxed in 2026
Overtime is usually paid at one and a half times your regular rate for hours over 40 in a week. It is taxed like the rest of your pay, at whatever rates your total income reaches.
The overtime deduction (“no tax on overtime”)
For tax years 2025 through 2028 you can deduct the premium part of overtime pay from your federal taxable income. The premium is the extra half in time-and-a-half: if your regular rate is $28 and overtime pays $42, the premium is $14 an hour. The limit is $12,500 a year, or $25,000 on a joint return, and it shrinks by $100 for every $1,000 of income above $150,000 ($300,000 joint).
Social Security and Medicare are still charged on all overtime pay. The federal deduction is not available to married people filing separately.
State income tax: Arizona, Idaho, Indiana (2026 only), Iowa, Michigan, Montana, North Dakota and Oregon also take the federal deductions for tips and overtime off state taxable income. Colorado follows the tips deduction but taxes overtime in full. Georgia excludes up to $1,750 of tips and up to $1,750 of overtime premium pay. Alabama lets you deduct up to $1,000 of overtime premium pay. Every other state with an income tax still taxes tips and overtime in full.
The guide to the overtime deduction has the details and worked examples.
Questions
Is overtime really tax free now?
No. Only the premium part (the extra half) can be deducted from federal taxable income, and only up to a yearly limit. Social Security and Medicare still apply to all of it, and most states still tax it.
Does my state tax overtime?
Arizona, Idaho, Indiana (2026 only), Iowa, Michigan, Montana, North Dakota and Oregon also take the federal deductions for tips and overtime off state taxable income. Colorado follows the tips deduction but taxes overtime in full. Georgia excludes up to $1,750 of tips and up to $1,750 of overtime premium pay. Alabama lets you deduct up to $1,000 of overtime premium pay. Every other state with an income tax still taxes tips and overtime in full.
Will my paycheck show the saving?
Only if your employer's withholding takes it into account, for example because you updated your W-4. Otherwise the same tax is withheld as before and you get the saving as a refund.
Does double time count?
The deduction covers the overtime premium that federal law requires, which is the extra half of your regular rate. The calculator counts at most half the regular rate per overtime hour, whatever multiplier you enter.