Income & Taxes · H.R.1 Deductions
Overtime Tax Deduction Calculator
Updated August 19, 2026 · See your H.R.1 federal tax savings on overtime pay (2025–2028).
Important: Estimates federal income tax savings only. FICA taxes (7.65%) still apply to all overtime income. Only FLSA-eligible overtime qualifies. Not tax advice.
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Annual Federal Tax Savings
22% marginal rate · $0/mo
For a $25/hr worker with 10 overtime hours/week (single filer, 1.5x overtime rate): Annual overtime pay: $19,500, of which $6,500 is qualified overtime — only the premium above your regular rate is deductible (capped at $12,500). Federal tax savings: ~$780–$1,430/year depending on tax bracket. FICA still owed: ~$5,470 (7.65% of your earned wages including overtime — non-wage income is not subject to FICA).
Typical scenario — enter your overtime hours and wage above for your personalized H.R.1 tax savings estimate.
Income Summary
Tax Comparison
FICA Taxes (Unchanged)
FICA taxes are NOT reduced by the H.R.1 overtime deduction. You still owe 7.65% on all earned income.
Effective Tax Rates
Not Tax Advice — IRS Circular 230 Notice: To comply with requirements imposed by the IRS under Circular 230, any U.S. federal tax information provided by this calculator is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any tax-related matter. This calculator provides estimates for educational purposes only and is not a substitute for professional tax advice. Consult a qualified tax professional or CPA for advice specific to your situation.
How the H.R.1 Overtime Tax Deduction Works
H.R.1 introduces a federal income tax deduction on FLSA-eligible overtime pay for tax years 2025 through 2028. Two limits shape what you actually deduct. First, only qualified overtime compensation counts — the portion of your overtime pay that exceeds your regular rate. At time-and-a-half, that is just the "half": a $25/hour worker paid $37.50/hour for overtime has a qualified premium of $12.50 per overtime hour, not $37.50. Second, it's a deduction, not an exemption — the qualified premium is subtracted from your taxable income up to a cap, but FICA (Social Security + Medicare) taxes still apply to every dollar of overtime earned.
Deduction, Not Exemption
H.R.1 provides a federal income tax deduction on the qualified portion of overtime pay — the premium above your regular rate. This reduces your taxable income but is not a full tax exemption, and it does not cover your whole overtime check. 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. Above $150,000 MAGI ($300,000 on a joint return), it is cut by $100 for every whole $1,000 of income above the threshold. At $175,000 a single filer loses $2,500 of the deduction, not all of it. The deduction only reaches zero once that reduction equals the cap you are claiming — $275,000 MAGI for the full $12,500 single cap, $550,000 for the $25,000 joint cap.
Who Qualifies for the Overtime Deduction
| Category | Eligibility |
|---|---|
| Eligible (FLSA non-exempt) | Manufacturing, Healthcare (non-exempt), Trucking, Construction, Retail, Warehousing, Food Service, Maintenance, Public Safety (non-exempt) |
| Not Eligible (FLSA exempt) | Salaried exempt employees, Independent contractors / 1099, Voluntary extra hours, Comp time, Executive / Administrative / Professional exemptions, Highly compensated employees |
Frequently Asked Questions
No, on two counts. First, the deduction covers only qualified overtime compensation — the portion of FLSA overtime pay that exceeds your regular rate. At time-and-a-half that is just the "half": a $25/hour worker paid $37.50/hour for overtime has a qualified premium of $12.50 per overtime hour, not $37.50. Second, it is a deduction, not an exemption: FICA taxes (Social Security 6.2% + Medicare 1.45% = 7.65%) still apply to all overtime income, and the deduction reduces your federal income tax only.
The cap depends on filing status: $12,500/year for single filers and head of household. $25,000/year for married filing jointly. Married filing separately cannot claim the deduction at all — H.R.1 allows a married taxpayer to claim it only on a joint return. The cap applies to your qualified overtime premium — the pay above your regular rate — not to total overtime pay. Premium above the cap, and the regular-rate portion of every overtime hour, are 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. A married taxpayer must also file a joint return: H.R.1 denies the overtime deduction to anyone filing married filing separately.
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. Above $150,000 MAGI ($300,000 on a joint return), the deduction is reduced by $100 for every whole $1,000 of income over that threshold. Because the reduction is a fixed dollar amount, the point at which it reaches zero depends on your cap: a single filer claiming the full $12,500 loses it entirely at $275,000 MAGI, and a joint filer claiming $25,000 at $550,000.
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. Within qualifying hours, only the premium above your regular rate is qualified overtime compensation — at time-and-a-half that is one third of the overtime check, and at double time it is one half.
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.
Related Calculators
Related Guides
Official Sources
- H.R.1 "One Big Beautiful Bill Act" Full Text (opens in new tab) — The legislative text establishing the temporary overtime deduction (2025–2028).
- U.S. Department of Labor: FLSA Overtime Requirements (opens in new tab) — Authoritative guidance on which workers qualify for FLSA overtime.
- IRS Publication 15-T: Federal Income Tax Withholding Methods (opens in new tab) — Annual withholding tables that drive the federal-tax savings math.
- DOL Fact Sheet #17A: Exemption for Executive, Administrative, Professional Employees (opens in new tab) — FLSA exemption tests for ineligible white-collar workers.
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