OBBBA lets workers deduct overtime premium pay — up to $12,500 single / $25,000 joint — from federal taxable income. Half-time portion of FLSA overtime only; phase-out matches the tips deduction.
Detailed instructions, formula notes, and US-context guidance shown in the calculator above.
Disclaimer: Estimate only. Consult a qualified professional for decisions with major financial, legal, or health consequences.
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Calculator information
📋 How to use this calculator
- Enter annual overtime hours worked above 40 hours/week (FLSA-mandated overtime only).
- Enter your regular hourly rate — straight time, not the time-and-a-half rate.
- Select filing status — Single or Married Filing Joint.
- Enter total MAGI (modified adjusted gross income) including all wages.
- Review the deduction (capped at $12,500 single / $25,000 joint) and the federal tax savings.
- Note: Only the HALF (premium) portion of time-and-a-half qualifies, not the straight-time hours.
🧮 OBBBA Overtime Deduction (Tax Years 2025-2028)
Deduction = min(OT_hours x rate x 0.5, Cap) x PhaseFactor
- OT_hours: annual FLSA-overtime hours (above 40/wk for non-exempt)
- rate: regular hourly rate (not OT rate)
- 0.5: time-and-a-half = 1.5x → premium portion is 0.5x of regular rate
- Cap: $12,500 single, $25,000 joint
- PhaseFactor: 1 below $150K single ($300K joint); linearly reduces to 0 over $75K ($150K) range
Only applies to FLSA-mandated overtime. Salaried-exempt workers do not qualify. State or contractual overtime rules above FLSA (e.g., California daily OT) only qualify for the portion that overlaps FLSA.
💡 Worked example: Manufacturing worker, 5 hours OT/week, $28/hr
Given:- Filing status: Single
- Annual OT hours: 5 x 50 working weeks = 250 hours
- Regular hourly rate: $28
- OT pay total (1.5x): 250 x $42 = $10,500
- Premium half only: 250 x $14 = $3,500
- Total MAGI: $65,000
Steps:- Premium half = 250 x $28 x 0.5 = $3,500
- Cap is $12,500 (single) — premium is well below
- MAGI $65K < $150K → full deduction allowed
- Federal tax savings = $3,500 x 12% (marginal bracket) = $420
Result: $420 federal tax saved annually. Per-hour effective bonus on overtime: $1.68/hr in tax savings on top of the time-and-a-half.
❓ Frequently asked questions
Do I get to deduct ALL of my overtime pay or just part?
Just the PREMIUM portion — the extra half-time component of time-and-a-half. If you work 10 hours OT at $20/hr, your OT pay is 10 x $30 = $300 total, but only the premium half (10 x $10 = $100) qualifies for the deduction. The straight-time portion (10 x $20 = $200) is still fully taxable.
What counts as 'FLSA-mandated overtime'?
Federal Fair Labor Standards Act requires non-exempt workers to receive 1.5x pay for hours over 40 in a single workweek. Salaried-exempt workers (executive, administrative, professional) are not entitled to FLSA OT and don't qualify for this deduction. California's daily OT (over 8 hours/day) only counts to the extent it overlaps FLSA weekly OT. Double-time (2x) above 12 hours: only the OT portion qualifies, not the additional half.
If I'm a gig worker or contractor with no overtime, does this apply?
No. The OBBBA OT deduction requires you to be an FLSA non-exempt employee receiving statutory time-and-a-half. 1099 contractors, gig workers, and self-employed individuals have no FLSA overtime and don't qualify.
Is the deduction reported on my W-2 automatically?
Starting with 2025 returns, employers must separately report qualifying overtime premium pay on Form W-2 box 14 (or a separate informational box). Verify your W-2 reflects the right amount before claiming. Self-track your OT hours throughout the year to cross-check.
How much can I save annually if I work a lot of OT?
Maximum benefit at the cap: $12,500 deduction x 22% marginal bracket = $2,750 federal tax saved (single). Joint filers at the $25K cap and 24% bracket save $6,000. Realistic median for a non-exempt worker doing 5-10 OT hours/week: $300-$1,500 in annual savings.
📚 Sources & references
Last updated: May 23, 2026