No Tax on Overtime Calculator

Only federal income tax. A no tax on overtime calculator does not remove Social Security tax or Medicare tax from your overtime pay. The OBBBA deduction under Public Law 119-21 carves out federal income tax only. Your FICA contributions keep running on every dollar of overtime, regular pay, and bonus pay you earn. This is the single biggest misunderstanding we hear from clients reading headlines about “no tax on overtime,” and it’s the first thing a properly built no tax on overtime calculator should clarify on screen.

Here’s the breakdown. On a $1,000 overtime check, roughly $62 goes to Social Security (6.2% up to the 2026 wage base of $184,500), and $14.50 goes to Medicare (1.45%, with no cap). That $76.50 in employee FICA is locked in no matter what the OBBBA deduction says about federal income tax. Your employer also pays a matching $76.50, which doesn’t show on your stub but is part of the total tax cost of your labor. The no tax on overtime calculator should display FICA as a separate line item so you don’t confuse it with federal income tax savings.

High earners catch an additional 0.9% Medicare surtax on wages over $200,000 single / $250,000 joint. That surtax is also untouched by the OBBBA deduction. If you’re a hospital department head pulling significant overtime and your wages clear $200,000, you’re paying 2.35% Medicare on the overage. The deduction lowers your federal income tax liability, not your Medicare bill. A complete no tax on overtime calculator surfaces both numbers.

State income tax is also untouched by the OBBBA deduction. New York State and New York City take their full bite. Same for California, New Jersey, Massachusetts, every other state with an income tax. Texas, Florida, Tennessee, and the other no-income-tax states didn’t need to do anything — their workers already paid zero state tax on overtime. So the calculator’s after-tax overtime estimate should subtract state tax in full from your gross check. New York City residents pay roughly 14.7% combined state and city on their top dollar; the OBBBA deduction does not change that.

Now the federal income tax piece. The deduction reduces your taxable income by the FLSA premium portion of your overtime, capped at $12,500 single / $25,000 joint, phased out above $150,000 / $300,000 MAGI. If you’re in the 22% federal bracket and you get $10,000 of qualifying premium pay, the deduction saves you $2,200 in federal income tax. Not $10,000. $2,200. Big difference, and the calculator should be explicit about it. Higher brackets save proportionally more — 24% bracket saves $2,400, 32% bracket saves $3,200 — but the cap and the MAGI phaseout usually pull those high-bracket workers out of the benefit anyway.

Even better, your employer is still going to withhold federal income tax on your overtime checks at the normal supplemental rate (22% flat for most paychecks, or aggregated with regular wages). The deduction happens at tax filing time when you reconcile on Form 1040. So you may see no change in your direct deposit during the year, then get a bigger refund or smaller balance due in April 2027. Some workers will want to adjust their W-4 mid-year to claim the deduction in withholding. A no tax on overtime calculator can give you the number to write in box 4(b) as a deduction estimate, though we generally recommend leaving withholding alone and pocketing the refund — less risk of accidentally under-withholding if your hours change.

A small piece of the slogan does happen to be technically correct: under the FLSA, overtime premium pay (the half-time portion) is not itself subject to any sort of FICA exemption either. Both halves of FICA apply to every dollar. So nothing about “no tax on overtime” means “no payroll tax on overtime.” The exemption is purely a federal income tax deduction, period.

One scenario where the FICA distinction really matters: someone close to the Social Security wage base. The 2026 base is $184,500, after which you stop paying the 6.2% Social Security portion (Medicare keeps running). If you’re already at or near the base from regular wages, your additional overtime pay only owes the 1.45% Medicare side (or 2.35% if you cross the high-earner Medicare surtax line). A no tax on overtime calculator should pick this up if it asks for your year-to-date gross wages. Plenty of hospital department heads, senior nurses, and union construction foremen sit right at or above $184,500 by November, and their late-year overtime carries a lower payroll-tax drag than their March overtime.

Self-employment is the other place this gets sticky. If you do both W-2 work with overtime and 1099 contractor work, the OBBBA deduction applies only to the FLSA premium portion of your W-2 wages. Your Schedule C net profit pays full self-employment tax (15.3% on the first $184,500 of combined earnings, then 2.9% Medicare on everything else). A no tax on overtime calculator focused on W-2 overtime doesn’t touch your 1099 side. If most of your income is contractor work with a small W-2 overtime gig on top, the deduction may save you a few hundred dollars and that’s it. We see this with TV grips and other production crew who carry both employee and contractor income in the same year.

The phrase “no tax on overtime” was the politically simple branding. The real rule is “a capped, income-limited, sunset-prone above-the-line deduction for FLSA-required overtime premium pay, applied only to federal income tax.” That doesn’t fit on a poster, but it’s what your no tax on overtime calculator is actually computing. If you want a full picture of what your 2026 paycheck looks like after FICA, state tax, and the new federal break, check our other paycheck tools alongside this one, or have us model it end-to-end on your individual return.

Because $5,000 of total overtime pay does not mean $5,000 of deductible premium. A no tax on overtime calculator that’s built right will only deduct the FLSA half-time portion of your overtime, which is roughly one-third of your gross overtime pay. So on $5,000 of total overtime wages, only about $1,667 is the qualifying premium. The other $3,333 is your regular hourly rate stretched across overtime hours, and that stays fully taxable. This is the math step where most people’s intuition goes sideways.

The math. Federal overtime is 1.5x your regular rate. If you earn $20/hour normally and work 10 overtime hours at $30/hour, your gross overtime is $300, but $200 of that is “straight time” (the $20/hour you would have earned anyway) and $100 is the “premium” (the extra half-time). Only the $100 premium qualifies for the OBBBA deduction. The straight-time portion is regular wages, taxed normally. A lot of people skim past this distinction and end up disappointed when their refund is hundreds of dollars smaller than what they assumed from the headline. A good no tax on overtime calculator should label the premium portion clearly so this surprise doesn’t hit at filing time.

Scale that to $5,000 of gross overtime: roughly $3,333 is straight-time wages (taxed) and roughly $1,667 is FLSA premium (deductible). If you’re in the 22% federal bracket, your deduction saves you about $367 in federal income tax. Not nothing. But not $1,100, which is what you’d expect if the whole $5,000 were deductible. The no tax on overtime calculator should display both the gross overtime number and the deductible-premium number side by side so you can see the gap. If it doesn’t, find a better tool.

Another reason the calculator shows residual federal tax: your regular wages don’t go away. If you earn $52,000 of regular pay plus $5,000 of overtime, your total income is $57,000. After standard deduction ($15,750 for single in 2026 under the latest IRS inflation adjustments) you’ve got about $41,250 of taxable income before the overtime deduction. Subtract the $1,667 premium deduction and you’re at $39,583. You still owe federal income tax on $39,583 of wages. The OBBBA break only carved out the premium piece — everything else is taxed under the regular brackets. The deduction is a small chip out of the bigger tax bill, not a wholesale exemption.

Now layer on FICA. On the full $5,000 of overtime, you owe 7.65% in employee FICA, which is $382.50. That’s federal payroll tax, not federal income tax, but it still hits your paycheck and the no tax on overtime calculator should display it. Combined federal tax on $5,000 of overtime — income tax minus the OBBBA deduction, plus FICA — ends up around $800-$900 in the 22% bracket. A real savings versus pre-OBBBA, but not a zero. State tax piles on top of that wherever you live in a tax state, and a no tax on overtime calculator that’s worth its name will show state tax as a separate line too.

If the calculator shows you zero federal tax on $5,000 of overtime, run away from it. That tool is either ignoring FICA, treating the entire overtime amount as deductible, or mishandling the bracket math. Same if it shows the deduction saving you the full $5,000 of overtime tax — that’s confusing a deduction with a credit. A deduction reduces taxable income. A credit reduces tax owed dollar-for-dollar. The OBBBA overtime break is a deduction. Worth knowing the difference before you build any tax plan around it.

One last thing the calculator can’t see: state-level overtime tax conformity. A handful of states are passing their own versions of the OBBBA overtime deduction (Alabama acted first, with effect from 2025). Where state conformity exists, your state taxable income also drops by the FLSA premium amount. Most states haven’t conformed. New York, California, Illinois, New Jersey — nothing yet at the state level. So when a no tax on overtime calculator displays federal savings, you may also want to check whether your state has separate legislation. The reedcorp.tax tool flags state conformity status state by state, but in mid-2026 the federal break is by far the bigger lever for residents of high-tax states.

If you want to sanity-check the calculator number, the math is straightforward enough to do by hand. Take your FLSA premium pay for the year, cap it at $12,500 (single) or $25,000 (joint), reduce by the MAGI phaseout if applicable, multiply by your marginal federal tax bracket (12%, 22%, 24%, 32%, or 35%), and that’s your federal tax savings. Anybody who works in payroll or finance can verify the calculator output that way in under 5 minutes. If the calculator number is way off your hand math, something is wrong with the tool — not the math.

If you want to ballpark the impact of the OBBBA deduction across all five of your scenarios in one sitting, here’s a quick approach. Take your projected 2026 gross overtime. Divide by 3 (since the FLSA premium is roughly one-third of total OT). Cap that number at $12,500 (single) or $25,000 (joint). Multiply by your federal bracket: 12%, 22%, 24%, 32%, or 35%. That’s your federal tax savings before any MAGI phaseout. A nurse expecting $24,000 of gross overtime divides by 3 to get $8,000 of premium — under the cap. Times 22% bracket = $1,760 of federal tax savings. A no tax on overtime calculator should produce a number close to that. If it’s wildly off, it’s applying the wrong formula.

The honest summary: a $5,000 overtime year saves a middle-bracket worker maybe $350 to $450 in federal income tax under the new rule, plus retains full FICA and state tax liability. If your overtime hits $15,000 or $20,000 and you’re under the MAGI phaseout, the savings climb to $1,000-$2,000 federal. Nurses pulling $25,000-$30,000 in a heavy OT year are the headline winners, often saving close to $2,700 federal, the practical max before the cap pinches. If you want help projecting your real 2026 number against the rest of your 2026 tax picture, our CPA team handles this every week for hourly clients across hospitals, factories, production crews, and restaurants.