Overtime Pay Calculator (1.5x, Double-Time & OBBBA Deduction)
Calculate overtime pay at time-and-a-half or double time, split OT wages into base and premium portions, and estimate the 2026 OBBBA overtime deduction — up to $12,500 single or $25,000 joint with the MAGI phase-out.
Overtime Pay — interactive calculator, computed instantly in your browser.
Overtime Pay in 2026: The 1.5x Rule and the New No-Tax-on-Overtime Deduction
Deductible Premium = 0.5 × Base Rate × OT Hours
| Line | Value | Detail |
|---|---|---|
| Base wage | $28.00/hr | 40 regular + 10 OT hours, 52 weeks |
| Overtime rate (1.5x) | $42.00/hr | $14.00/hr of it is premium |
| Weekly overtime pay | $420.00 | Annual overtime: $21,840 |
| Premium portion | $7,280/yr | Base portion $14,560 is ordinary income |
| 2026 OBBBA deduction | $7,280 | Under the $12,500 single cap, no phase-out |
| Federal tax saved at 22% marginal | $1,601.60 | Deduction × marginal rate |
| FICA still owed on overtime | $1,670.76 | 7.65% of every overtime dollar |
Key Point: Only the half-time premium counts for the OBBBA deduction — and FICA still takes 7.65% of every overtime dollar no matter what the deduction does.
Overtime is where hourly income gets interesting — and where a brand-new tax rule changes what you keep. The Fair Labor Standards Act sets the overtime floor at time-and-a-half over 40 hours a week, and the 2025 One, Big, Beautiful Bill Act added a deduction for the premium half of that pay, worth up to $12,500 single or $25,000 joint. This calculator computes both halves of the story: the paycheck math and the 2026 tax savings.
1. How Overtime Pay Is Calculated
Federal law requires non-exempt employees to receive at least 1.5× the regular rate for hours worked over 40 in a workweek (2× is common in union and California rules but not federally required). If you earn $28/hour, your overtime rate is $42. At 10 overtime hours a week that is $420 extra per paycheck-week — $21,840 over 52 weeks. The premium, the part above your base rate, is $14/hour: $7,280 a year.
2. The New 2026 Deduction for Qualified Overtime (IRC §225)
- What qualifies: only the premium — the half-time (or extra) portion above your regular rate for hours over 40. Regular-rate hours never qualify.
- Caps: $12,500 per return single or head of household, $25,000 married filing jointly. Married filing separately gets nothing.
- Phase-out: 10% of modified AGI above $150,000 single / $300,000 joint — the deduction is fully gone at $275,000 / $550,000.
- Window: tax years 2025 through 2028, claimed on the new Schedule 1-A.
In our example the $7,280 premium sits under the cap with MAGI at $75,000, so the full amount deducts — and at a 22% marginal bracket that is $1,601.60 back in your pocket.
3. What You Actually Keep
The deduction only touches federal income tax. FICA still applies to all overtime — 7.65% of $21,840 is $1,670.76 — and state income taxes (where they exist) are unaffected. Also remember the deduction reduces taxable income, not tax at a flat rate: its value is your marginal bracket (22% in the example, 24% or 32% for higher earners). An employer withholding flat supplemental rates on overtime can still over-withhold; the return, not the pay stub, settles it.
4. Who Qualifies: Exempt, Non-Exempt, and 1099
The deduction is for W-2 non-exempt employees. Salaried exempt professionals (executive, administrative, professional, and computer employees above the federal salary threshold) rarely earn overtime at all, self-employed 1099 contractors have no employer to pay overtime premium, and the IRS expects employers to report qualified overtime in W-2 Box 12 Code TT for 2026. Track the hours themselves with the ⏱️ Work Hours Calculator, convert salary roles with the 💼 Salary & Hourly Wage Calculator, and see the bracket the savings sit in with the 🏛️ Tax Bracket Calculator — more pay tools live in the 💰 Financial Hub.
🔗 Overtime & Take-Home Cross-References
Overtime only matters once it hits the paycheck — convert salary to hourly with the 💼 Salary & Hourly Wage Calculator, see the net with the 💵 Paycheck Calculator, and check the bracket your extra hours land in with the 🏛️ Tax Bracket Calculator inside the 💰 Financial Hub.
Build the schedule itself — shifts, breaks, and total hours — with the ⏱️ Work Hours Calculator in the 📅 Date & Time Hub.
Frequently Asked Questions (Overtime Pay)
Under the OBBBA, qualified overtime compensation is deducted above the line — up to $12,500 single or head of household and $25,000 married filing jointly. It applies to tax years 2025 through 2028, reduces income tax only, and phases out at 10% of every dollar of modified AGI above $150,000 single or $300,000 joint, reaching zero at $275,000 or $550,000.
Multiply your base hourly rate by 1.5, then by the overtime hours worked. At $28/hour the overtime rate is $42; 10 overtime hours pay $420 that week. Over 52 weeks the annual overtime total is $21,840, of which $7,280 (the $14/hour premium slice) is the OBBBA-deductible portion rather than the whole amount.
No — the federal tax code has no separate overtime bracket. Overtime stacks onto your total income and is taxed at your marginal rate like everything else. The confusion comes from withholding: many employers apply flat supplemental rates to overtime, which can look like a higher tax on the pay stub but usually reconciles at filing.
Generally no. The deduction targets W-2 non-exempt hourly employees who actually receive an overtime premium. Salaried exempt employees do not earn FLSA overtime, and self-employed 1099 filers have no employer paying a premium — their earnings run through self-employment tax instead. Certain public-safety and agricultural workers have different overtime rules entirely.
For 2026, employers must report qualified overtime compensation separately in Box 12 using Code TT (the separate reporting became mandatory for 2026; for 2025 it was optional). You claim the deduction on Schedule 1-A with your Form 1040. If Box 12 Code TT is missing but you have overtime records, you can substantiate the premium yourself with pay stubs showing base versus overtime hours.