Income & Taxes · H.R.1 Deductions
Overtime Tax Deduction Calculator
Updated May 22, 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.
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 (deduction capped at $12,500). Federal tax savings: ~$1,500–$2,750/year depending on tax bracket. FICA still owed: ~$5,470 (7.65% of total income).
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. It's a deduction, not an exemption: overtime pay is reduced 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 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
| 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. 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.
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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