How the No Tax on Overtime deduction works
The No Tax on Overtime Calculator on NoTaxOTCalculator is a free, private educational tool for estimating the IRS Schedule 1-A deduction for qualified overtime compensation. The policy goal behind Schedule 1-A Part III (often covered in explainers about “OBBBA” overtime relief) is to let eligible workers reducefederal income tax on the overtime premium — not on every dollar of overtime wages, and not on payroll taxes. That distinction matters: many viral posts blur “no tax on overtime” into “OT is tax-free,” which is not how Schedule 1-A works.
If you searched for an overtime tax deduction calculator, overtime tax refund calculator,schedule 1-a overtime estimator, IRS overtime premium calculator,OBBBA overtime deduction calculator, or a general free overtime tax calculator, this page is built for that job: clear inputs, honest limits, and math that matches Schedule 1-A’s premium-only design. Results are educational estimates — they do not file a return or guarantee a refund.
Premium-only math (not total OT pay)
Under Schedule 1-A, qualified overtime compensation is the amount paid above the FLSA regular rate. For classic time-and-a-half (1.5×), that premium equals 0.5 × FLSA regular rate × OT hours. Example: $20/hr regular rate and 10 OT hours → $100 qualified premium — not $300 of total OT wages. Mode A on this free overtime tax calculator models that 1.5× case only. If you have double-time, daily OT, seventh-day OT, or a clear “OT premium” line on a pay stub, use Mode B and enter the premium dollars directly. Entering total overtime wages into the premium field will overstate the deduction.
Optional “total OT wages” on Mode A is for education only. The deduction engine still uses the half-time premium, and the explain panel will call out large mismatches versus a simple 1.5× gross check.
FLSA regular rate vs. posted hourly wage
The FLSA regular rate is not always the number on your offer letter. Nondiscretionary bonuses, commissions, and certain other non-hourly pay can raise the regular rate above the posted wage. The deductible premium is 0.5 × regular rate, not 0.5 × posted wage. Pasting your “OT rate” into the regular-rate field overstates the premium because that rate already includes the half-time add-on.
This calculator asks whether you know your FLSA regular rate or are using a simple hourly estimate — and stamps estimate-only results so you do not confuse a shortcut with employer-reported figures. When in doubt — especially for tax year 2025 — prefer Mode B with a pay-stub premium or employer-reported qualified OT.
FLSA §7 gate
Only overtime required under federal FLSA §7 qualifies for Schedule 1-A. State-law or company-policy OT that is not also required under FLSA §7 generally does not (CRS). NoTaxOTCalculator requires a Yes / No / Not sure answer before showing a numeric claim. If you leave it unanswered, you get a warning and $0. If you answer No or Not sure, the calculator shows $0 and blocks Mode A and Mode B numeric claims rather than inventing a deduction. Confirm edge cases with Schedule 1-A instructions or a tax professional.
Caps, MAGI phaseout, and filing status
Annual OT caps in this MVP are $12,500 (single / HoH / QSS) and $25,000 (MFJ). MAGI phaseout starts at $150,000 or $300,000 (MFJ). The reduction is floor(excess ÷ 1,000) × $100 — for example, a single filer with $8,000 qualified premium and MAGI $155,500 sees a $500 reduction and a $7,500 deduction estimate. Married Filing Separately is treated as ineligible; married taxpayers generally must file jointly. A valid SSN is required under the statute’s MVP rules as described in IRS materials.
TY2025 reporting gap and 2026–2028 sunset
For tax year 2025, employers may not separately report qualified OT on the W-2. Prefer Mode B / pay-stub premium and follow Schedule 1-A instructions (and the IRS OT explainer) to reconstruct when needed. Selecting year 2025 surfaces a reporting-gap panel with a Mode B nudge. For 2026 and later, clearer reporting may become available; caps and thresholds in this estimator stay the same through 2028. The deduction sunsets after tax year 2028 under current MVP rules.
FICA still applies — this is not a payroll-tax escape
Schedule 1-A creates a federal income-tax deduction. Social Security and Medicare (FICA) taxes on overtime still apply. NoTaxOTCalculator repeats that callout under the page heading and again in the results panel so search snippets and screenshots cannot easily imply that overtime is free of payroll tax. We are not affiliated with the IRS or TurboTax, and this site is not filing software.
How to use this calculator
- Choose filing status and tax year (2025–2028).
- Answer the FLSA §7 eligibility question honestly.
- Prefer Mode B when you have an OT premium line; otherwise use Mode A with FLSA regular rate + hours.
- Say whether your Mode A rate is a known FLSA regular rate or a simple hourly estimate.
- Enter a MAGI estimate for phaseout (Schedule 1-A Part I concepts).
- Read the explain panel and phaseout alert — then confirm with IRS Schedule 1-A instructions or a tax professional before filing.
Also try our twin No Tax on Tips calculator for Schedule 1-A Part II ($25,000 tips cap per return, same MAGI phaseout method). Use both tools as planning aids, not as substitutes for official forms.