Under federal law, most hourly employees earn 1.5 times their regular rate for every hour worked over 40 in a week. At $20 an hour, 10 overtime hours pay $300, and your week totals $1,100 instead of $800.
Your gross pay this week is $1,100.00, including $300.00 of overtime.
| Regular pay | $800.00 |
| Overtime pay | $300.00 |
| Overtime rate per hour | $30.00 |
| Gross pay for the year | $57,200.00 |
| Deductible overtime premium for the year (No Tax on Overtime) | $5,200.00 |
| Estimated federal income tax saved |
The deduction only covers the FLSA-required “half” of time and a half, up to $12,500 ($25,000 married filing jointly), and is reduced above $150,000 of income ($300,000 joint). Double-time hours count only their FLSA-required half.
The Fair Labor Standards Act (FLSA) requires overtime after 40 hours in a workweek, not per day. A few states go further: California, Alaska, Nevada and Colorado also require overtime after a set number of hours in a day, and California requires double time after 12 hours in a day.
| Hourly rate | Overtime rate | Week with 5 OT hours | Week with 10 OT hours |
|---|---|---|---|
| $15.00 | $22.50 | $712.50 | $825.00 |
| $20.00 | $30.00 | $950.00 | $1,100.00 |
| $25.00 | $37.50 | $1,187.50 | $1,375.00 |
| $30.00 | $45.00 | $1,425.00 | $1,650.00 |
| $40.00 | $60.00 | $1,900.00 | $2,200.00 |
For tax years 2025 through 2028, employees can deduct the premium part of FLSA-required overtime from federal taxable income. In the IRS’s own example, an employee paid $20 an hour who works 10 overtime hours earns $300 of overtime pay, but only the $100 premium (the “half” in time and a half) is deductible.
Working 10 overtime hours every week at $20 an hour gives a premium of $5,200 a year, which saves a single filer about $624 in federal income tax. Use the No Tax on Overtime calculator if you already know your premium.
Updated November 2026. Sources: IRS overtime deduction FAQs, Schedule 1-A (Form 1040), 29 U.S.C. § 207. Methodology.
© 2026 PaycheckGauge. Estimates only, not tax advice.