Overtime Tax Savings at $25/Hour
Working 10 overtime hours per week at $25/hour (time-and-a-half), you earn $19,500 in annual overtime pay. Under the 2026 overtime tax exemption, you'd save approximately $3,073 in federal taxes — keeping an extra $256 per month.
Pay Details
Tax Details
Compensation Breakdown
Federal tax comparison with and without the overtime exemption.
| Item | Annual | Monthly |
|---|---|---|
| Regular Pay | $52,000 | $4,333 |
| Overtime Pay | $19,500 | $1,625 |
| Total Gross | $71,500 | $5,958 |
| Federal Tax (normal) | $7,190 | $599 |
| Federal Tax (OT exempt) | $4,118 | $343 |
| FICA | $5,470 | $456 |
Annual Tax Savings
$3,073
If overtime is exempt from federal income tax
Overtime Pay
Effective Hourly Rate
Monthly Impact
What This Means
The 2026 overtime tax exemption allows qualifying non-exempt employees to exclude overtime pay from federal income tax. At $25/hour, your overtime rate is $37.5/hour (time-and-a-half). Working 10 overtime hours per week, you earn $19,500 in annual overtime pay. Without the exemption, this overtime income would be taxed at your marginal federal rate. With the exemption, you save $3,073 in federal taxes annually — that's $256 more in your pocket each month. To qualify, you must be a non-exempt employee under the Fair Labor Standards Act (FLSA) and your overtime must exceed 40 hours in a workweek. Important: FICA taxes (6.2% Social Security + 1.45% Medicare) still apply to overtime pay. Self-employed individuals and exempt (salaried) employees generally do not qualify for this exemption.