No Tax on Overtime Calculator
See exactly how much more take-home pay you get when overtime wages are exempt from federal income tax withholding under the 2026 Big Beautiful Bill. Enter your regular hourly rate, overtime hours, and tax bracket — instant results.
Updated: · Based on the Big Beautiful Bill as passed by the House on May 14, 2026 (pending Senate)
Your Overtime Details
Your Overtime Tax Savings
Federal exemption only — FICA (SS + Medicare) still applies to overtime wages. State income tax also still applies. Law not yet in effect as of May 17, 2026.
What Is the No Tax on Overtime Rule?
The no tax on overtime rule is a federal income tax exemption for overtime wages included in the Big Beautiful Bill — the 2026 TCJA extension legislation passed by the House of Representatives. Under current law, overtime pay is taxed as ordinary income at your marginal federal rate, just like regular wages. The proposed exemption would remove federal income tax withholding from qualified overtime wages entirely, meaning every extra hour you work beyond 40 per week results in more take-home pay rather than a larger tax bill. FICA taxes — Social Security at 6.2% and Medicare at 1.45% — continue to apply to all wages including overtime under this proposal.
This calculator shows you the exact dollar difference between your current paycheck and what you would receive once the overtime tax exemption takes effect, based on your specific hourly rate, weekly overtime hours, and federal tax bracket.
How to Use the No Tax on Overtime Calculator
Enter Your Regular Hourly Rate
Type your base hourly wage — this is your regular rate of pay as defined by the FLSA. Do not enter your overtime rate (that is calculated automatically at 1.5×). Most workers' regular rate is found on their most recent pay stub or offer letter.
Enter Your Weekly Overtime Hours
Enter the number of hours you typically work beyond 40 hours per week. Under FLSA rules, non-exempt hourly employees must be paid at least 1.5× their regular rate for every hour past 40. If your overtime varies week to week, use your average.
Select Your Federal Tax Bracket
Choose your marginal federal income tax rate — the rate applied to your last dollar of income, not your effective rate. You can find this on your Form 1040 or by checking the 2026 IRS tax brackets. Most full-time hourly workers earning $35,000–$89,000 fall in the 12% or 22% bracket.
Choose Your Pay Frequency
Select how often your employer pays you — weekly, bi-weekly (every two weeks), semi-monthly (twice a month), or monthly. This determines how the weekly overtime savings are grouped into a per-paycheck figure so you can see the real difference in each deposit.
Read Your Results — What the Numbers Mean
The green savings banner shows your federal tax saved per paycheck and per year. The breakdown table shows your current federal withholding versus the new law withholding, your FICA deductions (which still apply), any state income tax (which still applies), and your new net take-home pay. The difference between "Federal Tax — Current" and "Federal Tax — New Law" is your overtime tax exemption savings.
How the Overtime Tax Exemption Is Calculated
The exemption targets the federal income tax withholding on overtime wages specifically — not FICA taxes, not state taxes. Here is the exact math this calculator uses:
Step 1 — Calculate Your Weekly Overtime Wages
Overtime pay = hourly rate × 1.5 × overtime hours worked beyond 40 per week. For a worker earning $25/hr working 10 hours of overtime: $25 × 1.5 × 10 = $375 in weekly overtime wages. This is the amount that would become tax-free under the exemption.
Step 2 — Calculate Current Federal Tax on Overtime
Under current law, overtime wages are ordinary income taxed at your marginal federal rate. A worker in the 22% bracket earning $375/week in overtime pays $375 × 22% = $82.50/week in federal income tax on those overtime hours. Across a year that is $82.50 × 52 = $4,290 paid to the IRS purely from overtime wages.
Step 3 — Calculate New Law Federal Tax on Overtime
Under the proposed overtime tax exemption, that same $375 weekly overtime pay has $0 federal income tax withheld. The worker keeps the full $82.50/week previously sent to the IRS — an extra $3,432–$4,290/year depending on pay frequency.
What the Income Cap Means for Qualifying Overtime
The Big Beautiful Bill includes an income cap provision. Employees earning above approximately $160,000 in annual wages may not qualify for the full exemption. High-income salaried employees who do not receive FLSA overtime — executives, managers, and other exempt employees — do not qualify regardless of income. The exemption is designed specifically for hourly, non-exempt workers who receive time-and-a-half overtime pay under federal labor law.
Does No Tax on Overtime Affect Social Security or Medicare?
No. FICA taxes — Social Security at 6.2% on wages up to $176,100 and Medicare at 1.45% on all wages — continue to apply to overtime wages under the proposed law. The exemption applies only to federal income tax withholding. Your employer will still withhold FICA from every dollar of overtime pay.
When Does the Overtime Tax Exemption Take Effect?
As of May 17, 2026, the no tax on overtime provision has passed the House on May 14, 2026 as part of the Big Beautiful Bill. The Senate must pass the bill and the President must sign it before employers can update their payroll withholding. Once enacted, the IRS will issue updated Publication 15 (Employer's Tax Guide) and revised W-4 withholding tables. Employers would then stop withholding federal income tax from qualifying overtime wages in subsequent payroll runs. Monitor IRS.gov/newsroom and DOL.gov overtime guidance for the official effective date announcement.
California and No Tax on Overtime
California workers should note that California state income tax — which ranges up to 13.3% — is not affected by the federal exemption. California overtime wages will continue to have California state income tax withheld regardless of what the federal law changes. However, California workers do benefit from the federal portion of the exemption. For a California worker in the 22% federal bracket, the savings are the same as for any other state on the federal side.
2026 Overtime Pay Rules at a Glance
The following applies to FLSA non-exempt hourly workers:
| Item | Current Law | Proposed (Big Beautiful Bill) |
|---|---|---|
| Federal Income Tax on OT | Taxed at marginal rate | Exempt — $0 withheld |
| Social Security (6.2%) | Applies to OT wages | Still applies to OT wages |
| Medicare (1.45%) | Applies to OT wages | Still applies to OT wages |
| State Income Tax | Applies (varies by state) | Still applies (federal only) |
| OT Rate | 1.5× regular rate (FLSA) | 1.5× regular rate (unchanged) |
| Income Cap | N/A | ~$160,000 annual wage cap |
No Tax on Overtime Calculator — Frequently Asked Questions
What is the no tax on overtime rule?
The no tax on overtime rule, included in the Big Beautiful Bill (TCJA extension), exempts overtime wages from federal income tax withholding for qualifying employees. Standard overtime — hours worked beyond 40 per week at 1.5× the regular rate of pay — would no longer have federal income tax withheld, increasing take-home pay for hourly workers. FICA taxes (Social Security and Medicare) and state income taxes continue to apply.
Who qualifies for no tax on overtime in 2026?
Under the proposed legislation, qualifying employees are those paid overtime under the FLSA — generally hourly non-exempt workers who earn overtime for hours worked beyond 40 per week. The bill includes an income cap; workers earning above approximately $160,000 annually may not qualify for the full exemption. Salaried exempt employees — including most managers, executives, and professionals — who do not receive FLSA overtime pay do not qualify regardless of how many hours they work.
When does no tax on overtime start?
As of May 17, 2026, the no tax on overtime provision is part of the Big Beautiful Bill that passed the House on May 14, 2026. The Senate vote and presidential signature determine the effective date. If enacted, the IRS would issue updated W-4 withholding guidance instructing employers to stop withholding federal income tax on qualified overtime wages. No employer is required to change payroll withholding until the IRS issues official guidance following enactment. Check IRS.gov/newsroom for the official start date.
Does no tax on overtime apply to state taxes?
No. The overtime tax exemption is a federal income tax provision only. State income taxes continue to apply to overtime wages in all states that have a state income tax. Florida and Texas workers benefit the most because they already have no state income tax, meaning the federal exemption covers their only income tax obligation on overtime. California workers — who pay up to 13.3% state income tax — will still have California state income tax withheld from overtime wages regardless of the federal change.
How much more money will I take home with no tax on overtime?
The amount depends on your regular hourly rate, weekly overtime hours, and your federal tax bracket. A worker earning $25/hour working 10 hours of overtime weekly in the 22% bracket saves approximately $286/month or $3,432/year in federal income tax on overtime wages. A worker at $20/hour with 5 hours of overtime weekly in the 12% bracket saves approximately $78/month or $936/year. Use the calculator above to get your exact savings based on your specific pay and hours.
Will I get an overtime tax refund for 2025?
No. The no tax on overtime exemption is a prospective change — it applies to overtime wages earned after the law's effective date, not retroactively to previous tax years. You cannot claim an overtime tax refund for 2025 or earlier years based on this legislation. The exemption changes future withholding on your paycheck going forward; it does not reopen prior tax returns.
Does the overtime tax exemption affect my W-4?
Once the law is signed and the IRS issues updated withholding guidance, employers will adjust payroll systems automatically — you likely will not need to file a new W-4 solely for this change. However, if you want to fine-tune your overall withholding (for example, to avoid an unexpected tax bill at filing if your overtime puts you in a higher bracket for other income), you can submit an updated W-4 to your employer at any time. The IRS Tax Withholding Estimator at apps.irs.gov can help you determine the right withholding allowances.
Is overtime still taxed for Social Security and Medicare?
Yes. FICA taxes — Social Security at 6.2% on wages up to $176,100 and Medicare at 1.45% on all wages — continue to apply to all overtime wages under the proposed exemption. The no tax on overtime rule removes only federal income tax withholding. This means workers with very low income tax burdens (in the 10% bracket) will see a smaller percentage benefit compared to those in higher brackets, since FICA already reduces every paycheck regardless of the income tax change.
What is "qualified overtime" under the Big Beautiful Bill?
Qualified overtime refers to overtime compensation paid in accordance with the FLSA — specifically, time-and-a-half pay for hours worked beyond 40 in a standard workweek by non-exempt employees. It does not include overtime-like arrangements outside the FLSA structure, such as premium pay for weekend shifts not tied to hours above 40, double-time for holidays not required by law, or voluntary overtime payments that do not meet the FLSA definition. The IRS is expected to publish a formal definition of "qualified overtime" in the implementing regulations.
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