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No tax on overtime

The deduction is for qualified overtime compensation above the regular rate. It is claimed on the tax return. It does not stop Social Security or Medicare withholding.

Tax year 2026 Tables verified 2026-10-09
Overtime, tips, and bonus
W-4, benefits, local tax, and year-to-date

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Every two weeks

Net pay $1,992.16

Effective tax rate 16.12% of gross. About $4,316.35 a month over a full year.

  • Net pay $1,992.16
  • Federal income tax $201.15
  • FICA $181.69
This paycheck
$1,992.16
Full year, net
$51,796.22
Full year, gross
$61,750.00
Hourly equivalent
$25.00
  • The overtime and tips deduction is claimed on the tax return. It does not lower Social Security, Medicare, or withholding on this paycheck.
How we calculated this
Gross pay$2,375.00
  1. This paycheck $2,375.00

Amount entered. Hourly rate times hours, plus overtime, tips, and any bonus on this check.

Federal income tax$201.15
  1. 1a Taxable wages this period $2,375.00
  2. 1b Pay periods in the year 26
  3. 1c Annualized wages (1a × 1b) $61,750.00
  4. 1d Step 4(a) other income $0.00
  5. 1e 1c + 1d $61,750.00
  6. 1f Step 4(b) deductions $0.00
  7. 1g $8,600.00 (any other filing status)
  8. 1i Adjusted annual wages $53,150.00
  9. Table Single or married filing separately, standard (Pub 15-T 2026)
  10. Bracket $19,900.00 up to $57,900.00: $1,240.00 plus 12% of the amount over $19,900.00
  11. 2g Tentative annual tax $5,230.00
  12. 2h Per paycheck (2g ÷ periods) $201.15
  13. 3 Step 3 credits, per paycheck $0.00
  14. 4c Extra withholding $0.00
  15. Federal income tax this paycheck $201.15

IRS Publication 15-T (2026), Worksheet 1A. Percentage method for automated payroll systems.

Social Security$147.25
  1. Rate 6.2% × $2,375.00 of Social Security wages, wage base $184,500.
  2. This paycheck $147.25

Social Security Administration, contribution and benefit base. 6.2% up to the 2026 wage base of $184,500. The annual maximum is $11,439.

Medicare$34.44
  1. This paycheck $34.44

IRS Publication 15 (2026). 1.45% of Medicare wages. No wage base.

Texas income tax$0.00
  1. State income tax $0.00. No wage income tax.

Texas Comptroller of Public Accounts. Texas does not tax wage income.

Net pay$1,992.16

What this estimate uses

The premium is half the hourly rate times overtime hours times 52. The cap and the phase-out are then applied. Tips have their own cap of $25,000, which is not doubled for a joint return. The phase-out reduces the overtime deduction first.

Questions

What is the cap?

$12,500 for single, head of household, and married filing separately. $25,000 for married filing jointly.

When does it phase out?

The deduction shrinks by $100 for each whole $1,000 of income over $150,000, or over $300,000 for married filing jointly.

Does a higher overtime multiplier increase the deduction?

Not in this estimate. The deductible piece stays at half the regular rate times the overtime hours.

Can I put this on Form W-4?

You can raise Step 4(b) if you want less federal income tax withheld. That does not change FICA, and this page does not fill out the form for you.

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Who is responsible

Published by PaycheckZip.com. A credentialed reviewer has not signed this page. The review seat is open. Figures are estimates from the tables named in the method, checked 2026-10-09. They are not tax advice.

Case amounts on the public list, such as $216.15 of federal income tax on the single biweekly example, come from the same code as this page.