Overtime Tax Calculator 2026: How Much Tax Do You Pay on OT?
OBBBA 2026 created a new federal deduction for overtime pay — up to $12,500 for single filers and $25,000 for married couples. Here is exactly how it works and how to calculate your overtime tax bill.
Under OBBBA 2026, you can deduct up to $12,500 in overtime pay (single) or $25,000 (married filing jointly) from federal taxable income. On $10,000 in OT at the 22% bracket, this saves you $2,200 in federal income tax. FICA taxes still apply.
What Is the OBBBA Overtime Deduction?
The One Big Beautiful Bill Act (OBBBA), enacted in 2026, introduced a federal deduction for overtime pay received by W-2 employees. If you worked overtime hours paid at 1.5x or 2x your regular rate, that overtime pay is now deductible from your federal taxable income — up to $12,500 for single filers and $25,000 for married filing jointly.
This means overtime pay is effectively excluded from federal income tax up to the cap. It does not affect FICA taxes (Social Security 6.2%, Medicare 1.45%) which still apply to all wages.
How to Calculate Your Overtime Tax in 2026
Overtime pay: $8,000
Standard deduction: −$16,100
OT deduction (OBBBA): −$8,000 (under $12,500 cap)
Taxable income: $38,900
Federal income tax: ~$4,507
Saved vs no OT deduction: ~$1,760
Who Qualifies for the Overtime Deduction?
W-2 employees who receive overtime pay (hours worked beyond 40 per week at 1.5x or 2x rate) qualify. The deduction applies to overtime received in 2026 and reported on your 2026 tax return. Self-employed workers and independent contractors do not qualify — this deduction is for W-2 overtime only.
Single vs Married: Deduction Caps
| Filing Status | OT Deduction Cap | Max Tax Saved (22%) |
|---|---|---|
| Single | $12,500 | $2,750 |
| Married Filing Jointly | $25,000 | $5,500 |
| Head of Household | $12,500 | $2,750 |
FAQ
The Internal Revenue Service requires self-employed individuals and freelancers to pay estimated taxes quarterly if they expect to owe at least $1,000 in federal tax for the year.— IRS.gov — Self-Employed Tax Center
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