No Tax on Overtime Calculator

What is the No Tax on Overtime Bill?

The "No Tax on Overtime" provision is part of the proposed Big Beautiful Bill — a comprehensive tax reform package being considered by Congress. If enacted, the bill would eliminate federal income tax on overtime pay for qualifying workers from tax years 2025 through 2028.

The proposal aims to put more money in the pockets of hourly workers who regularly work beyond 40 hours per week. For a worker earning $25/hr who works 10 hours of overtime weekly, this could mean thousands of dollars in annual tax savings.

As of early 2026, the bill is still making its way through Congress. While the House has passed its version, the Senate is still deliberating. No changes have been enacted into law yet, and the final details may differ from current proposals.

How Would No Tax on Overtime Work?

Under the proposed legislation, overtime pay — defined as hours worked beyond 40 per week for non-exempt employees under the FLSA — would be excluded from federal taxable income. Here's who would be eligible:

• W-2 employees only — independent contractors and self-employed individuals (1099 workers) would not qualify
• Non-exempt workers — you must be classified as non-exempt under the Fair Labor Standards Act
• Income cap: Annual income must be below $150,000 (single) or $300,000 (married filing jointly)
• Overtime definition: Only hours that qualify as overtime under the FLSA (generally over 40/week) would be tax-free

The tax exemption would apply only to the federal income tax portion. Social Security, Medicare (FICA), and state taxes would still apply to overtime earnings.

Examples of Potential Savings

Here are three real-world scenarios showing how much workers at different wage levels could save annually:

Who Qualifies for No Tax on Overtime?

The proposed legislation targets traditional hourly workers. To qualify, you would generally need to meet all of the following criteria:

• Be a W-2 employee (not an independent contractor or freelancer)
• Be classified as non-exempt under the FLSA (eligible for overtime pay)
• Earn less than the income cap ($150,000 single / $300,000 MFJ)
• Work hours that legally qualify as overtime (generally beyond 40 hours per week)

Salaried exempt employees, gig workers, and those earning above the income threshold would not benefit from this provision.

When Does No Tax on Overtime Start?

The no tax on overtime provision is not yet law. It is part of pending legislation that is working its way through Congress. Key timeline points:

• The House passed its version of the Big Beautiful Bill
• The Senate is currently deliberating and may make changes
• If passed and signed by the President, it would apply retroactively to tax years 2025 through 2028
• Workers would likely claim the exemption when filing their annual tax returns

We recommend checking back for updates as the legislative process continues. Until the bill is signed into law, overtime pay remains fully taxable at the federal level.

Does This Apply to State Taxes?

No. The proposed no tax on overtime legislation only affects federal income tax. State income taxes would remain unchanged. However, if you live in a state with no income tax — such as Texas, Florida, Nevada, Washington, Wyoming, South Dakota, Alaska, Tennessee, or New Hampshire — you already pay no state tax on any wages, including overtime.

Some states may choose to pass their own legislation mirroring the federal exemption, but no state has done so yet.