Estimated federal tax savings
$650
From deducting all $5,000 of your qualified overtime (2026 federal income tax)
Part of your deduction comes out of a lower bracket, so you save 13% of it on average rather than your 22% top rate.
Overtime deduction
$5,000
Qualified overtime premium
$5,000
Total overtime pay
$15,000
Your federal tax bracket
22%
Federal income tax with and without the deduction
- Taxable income without the deduction
- $50,900
- Taxable income with the deduction
- $45,900
- Federal income tax after credits, without the deduction
- $5,910
- Federal income tax after credits, with the deduction
- $5,260
- Deduction taken from the 22% bracket
- $500
- Deduction taken from the 12% bracket
- $4,500
- Federal income tax saved
- $650
How your deduction is figured
- Overtime hours per year
- 400 (8 × 50 weeks)
- Total overtime pay at time-and-a-half
- $15,000
- Qualified premium (½ × $25 × hours)
- $5,000
- Annual cap (per return)
- $12,500
- Modified AGI
- $67,000
- Phase-out (MAGI over $150,000)
- $0
- Overtime deduction (Schedule 1-A)
- $5,000
Social Security and Medicare still apply: about $1,148 of FICA tax on this overtime pay. Your state may tax it too: each state decides whether to offer a similar deduction.
Employers still withhold federal income tax on overtime, so the savings usually show up as a bigger refund when you file — unless you update Step 4(b) of your Form W-4.
Savings at other overtime levels
| Overtime | Overtime pay | Qualified premium | Deduction | Tax savings |
|---|---|---|---|---|
| 2 hrs / wk | $3,750 | $1,250 | $1,250 | $150 |
| 4 hrs / wk | $7,500 | $2,500 | $2,500 | $300 |
| 6 hrs / wk | $11,250 | $3,750 | $3,750 | $450 |
| 8 hrs / wk | $15,000 | $5,000 | $5,000 | $650 |
| 10 hrs / wk | $18,750 | $6,250 | $6,250 | $1,175 |
| 15 hrs / wk | $28,125 | $9,375 | $9,375 | $2,063 |
| 20 hrs / wk | $37,500 | $12,500 | $12,500 | $2,750 |