Overtime Tax Deduction Calculator
Calculate your federal income tax savings under the H.R.1 overtime deduction (2025-2028). See how much more you keep from your overtime pay. Note: FICA taxes (7.65%) still apply to all overtime income.
Quick Answer
How much do overtime workers save under H.R.1?
For a $25/hr worker with 10 overtime hours/week (single filer, 1.5x overtime rate): Annual overtime pay: $19,500 (within $12,500 deduction cap). Federal tax savings: ~$1,500-$2,750/year depending on tax bracket. FICA still owed: ~$5,720 (7.65% of total income).
Calculate your exact overtime tax savings with our interactive calculator below.
Key Takeaways
- H.R.1 lets FLSA-eligible workers deduct overtime pay from federal income tax (2025-2028)
- Deduction cap: $12,500 single / $25,000 married filing jointly per year
- FICA taxes (7.65%) still apply to all overtime income -- overtime is NOT fully exempt from tax
- Phase-outs begin at $150,000 single / $300,000 MFJ -- high earners get a reduced deduction
- Only FLSA-required overtime qualifies -- exempt employees, independent contractors, and voluntary extra hours do not
Important: This calculator estimates federal income tax savings only. FICA taxes (7.65%) still apply to all overtime income. Only FLSA-eligible overtime qualifies. This is not tax advice.
Enter your overtime hours and pay details above, then click Calculate Overtime Tax Savings to see your results.
Tax Breakdown
Where Your Overtime Pay Goes
Important: These results are estimates for educational purposes only. Actual tax savings depend on your complete tax situation. FICA taxes (7.65%) are not affected by the H.R.1 deduction. Only FLSA-eligible overtime qualifies. This calculator is not affiliated with the IRS. Consult a qualified tax professional before making tax decisions.
How the H.R.1 Overtime Tax Deduction Works
Deduction, Not Exemption
H.R.1 provides a federal income tax deduction on overtime pay. This reduces your taxable income but is not a full tax exemption. FICA taxes (7.65%) continue to apply. The cap is $12,500/year for single filers or $25,000/year for married filing jointly.
Income Phase-Out
The deduction phases out for higher earners. Single filers: phase-out begins at $150,000 MAGI and is fully eliminated at $175,000. Married Filing Jointly: begins at $300,000 and eliminated at $325,000.
Who Qualifies for the Overtime Deduction
Eligible (Non-Exempt)
- Manufacturing and factory workers
- Healthcare workers (non-exempt/hourly)
- Trucking and transportation
- Construction and trades
- Retail and service workers
- Warehouse and logistics
- Food service and hospitality
- Maintenance and janitorial
Not Eligible (Exempt)
- Salaried exempt employees
- Independent contractors / 1099
- Voluntary extra hours (not FLSA-required)
- Comp time arrangements
- Executive, administrative, professional exemptions
- Highly compensated employees
Frequently Asked Questions
No. H.R.1 provides a federal income tax deduction on overtime pay, not a full tax exemption. FICA taxes (Social Security 6.2% + Medicare 1.45% = 7.65%) still apply to all overtime income. The deduction reduces your federal income tax only and is limited to FLSA-eligible overtime hours.
The cap depends on filing status: $12,500/year for single filers, head of household, and married filing separately. $25,000/year for married filing jointly. Overtime pay above the cap is taxed normally. The deduction applies to tax years 2025-2028.
Only FLSA-eligible (non-exempt) workers qualify. This includes most hourly workers in manufacturing, healthcare, trucking, construction, retail, warehousing, food service, and maintenance. Salaried exempt employees, independent contractors, and voluntary overtime outside FLSA requirements do not qualify.
The H.R.1 overtime deduction is a temporary provision that applies to tax years 2025 through 2028. After December 31, 2028, overtime pay returns to being fully subject to federal income tax.
Yes. The deduction begins to phase out at $150,000 MAGI for single filers ($300,000 for married filing jointly). The deduction is fully phased out at $175,000 single ($325,000 MFJ).
Yes. FICA taxes (7.65%) are not affected by the H.R.1 overtime deduction. You continue to owe Social Security (6.2%) and Medicare (1.45%) on all overtime income regardless of the deduction.
Only overtime hours required under the Fair Labor Standards Act (FLSA) qualify. This generally means hours worked beyond 40 in a workweek for non-exempt employees paid at time-and-a-half or higher. Voluntary extra hours, comp time, and overtime by exempt employees do not qualify.
Yes, if you qualify for both. The tips deduction (up to $25,000) and the overtime deduction ($12,500/$25,000) are separate provisions under H.R.1. A tipped worker who also works overtime could potentially claim both deductions, subject to their respective caps and phase-out limits.
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