Overtime is still taxed. The new deduction removes only the FLSA premium from taxable income, up to the cap, and only if your income stays under the phase-out. This page shows the income tax that deduction is worth and the payroll tax that remains.
Tax saved ≈ tax before the deduction − tax after it, using 2026 brackets. Payroll tax is 7.65% of the overtime cash.
Social Security and Medicare still apply. This deduction does not reduce them, and the payroll line ignores the wage base.
| FLSA overtime premium | $3,000.00 |
|---|---|
| Deduction after cap and phase-out | $3,000.00 |
| Estimated federal income tax saved | $660.00 |
| Employee payroll tax still due | $688.50 |
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Qualified overtime is the extra half in time-and-a-half, not the whole overtime check. Ten hours at $30 is $450 of overtime pay and $150 of qualified premium. If a statement shows $15,000 of total time-and-a-half pay, the premium is $15,000 ÷ 3 = $5,000. Double time does not add a second qualified half.
The deduction is capped at $12,500, or $25,000 on a joint return, for 2025 through 2028. It then drops by $100 for each full $1,000 of modified AGI over $150,000, or over $300,000 on a joint return. Married people who file separately get nothing. A Social Security number is required.
The deduction lowers taxable income. It does not lower Social Security or Medicare. Tax saved is estimated with 2026 brackets and the 2026 standard deduction, treating modified AGI as the income before this deduction and with no other adjustments.
| Deduction | $3,000.00 |
|---|---|
| Tax saved | $660.00 |
| Payroll tax still due | $688.50 |
| Deduction after phase-out | $9,000.00 |
|---|---|
| Tax saved | $2,160.00 |
The straight-time half of time-and-a-half is taxed as ordinary income. The premium is deductible only up to the cap and the phase-out. Tax saved here is the difference in 2026 income tax with and without that deduction, using the standard deduction and no other adjustments.
Social Security and Medicare apply to the whole overtime payment, including the straight-time portion, not just the deductible half. The line is the employee share and it does not stop at the Social Security wage base.
Not automatically. This is a federal deduction. Your state may still tax the full overtime amount. Nothing on this page is a state figure.