No Tax on Overtime Calculator
Use this free no tax on overtime calculator to estimate your 2026 savings. The law lets hourly workers deduct overtime premium pay from federal income tax, up to $12,500 per year.
No tax on overtime explained
President Trump signed the no tax on overtime bill in July 2025 as part of the One Big Beautiful Bill Act. The deduction covers the premium part of your overtime pay. That is the extra half in time and a half. Work an hour at $30 regular pay and you earn $45 in overtime. Only the extra $15 is deductible. Your W-2 will show the qualified amount in box 12 under code TT.
The caps
The most you can deduct is $12,500 per year. Married couples filing jointly can deduct up to $25,000. The deduction runs for tax years 2025 through 2028. You can claim it on top of the standard deduction using Schedule 1-A.
The no tax on overtime income limit
The deduction drops by $100 for every $1,000 of income above $150,000. For married couples the limit is $300,000.
Who qualifies for no tax on overtime
The overtime must be required by federal law (FLSA). That means hourly workers past 40 hours a week. Overtime that only comes from a state rule or a union contract may not count. Salaried workers who are exempt from overtime do not qualify. You still pay Social Security and Medicare tax on overtime.
Frequently asked questions
Is there no tax on overtime now?
Yes. The no tax on overtime law is in effect right now. It passed in July 2025 and applies to tax years 2025 through 2028. If you worked overtime in 2025 or 2026 you can claim the deduction when you file.
What does no tax on overtime mean?
It means hourly workers can subtract the premium half of their time and a half pay from their federal taxable income. You still earn the overtime and still pay Social Security and Medicare on it. But the federal income tax on the premium portion drops to zero, up to the $12,500 cap.
Does California have no tax on overtime?
The federal deduction applies to everyone. But California has not adopted the overtime deduction at the state level. California workers get the federal savings but may still owe state income tax on their overtime pay. See which states still tax your overtime.
Is all overtime tax free?
No. Only the premium half of time and a half is deductible. Your regular rate is still fully taxed. Read the full breakdown at is overtime tax free in 2026.
Do nurses qualify for the overtime deduction?
Most hourly nurses qualify. But salaried nurse managers and state-only overtime have limitations. See the nurses and truckers overtime guide.
Do truckers get the overtime deduction?
Most long haul truckers do not, because of the motor carrier exemption. Local delivery drivers often do. Read the full trucker explanation.
Where does overtime show on my W-2?
Box 12, code TT. This shows your qualified overtime premium, the number you use for the deduction. Read the W-2 codes explained.
When does no tax on overtime start?
It applies to tax years 2025 through 2028. Qualifying overtime you earn during the 2025 calendar year is the first that counts, and you claim the deduction when you file your 2025 return in early 2026. Employers begin reporting the qualified premium in W-2 Box 12 code TT for tax year 2025 onward.
Is no tax on overtime a real law? Did it pass?
Yes. It was signed into law in 2025 as part of the One Big Beautiful Bill Act. It is not a proposal or a campaign promise — it is an active federal deduction. Note it is a deduction on Schedule 1-A, not a full exemption, so the tax withheld from your paychecks does not change; you claim the benefit on your return.