Overtime Premium
The overtime premium is the extra pay above your regular rate for hours past 40 a week, the half in time-and-a-half. Under the 2025-2028 no-tax-on-overtime deduction, this premium portion is what qualifies, up to $12,500 ($25,000 joint).
Time-and-a-half has two parts: the regular rate you would have earned anyway, and the premium, the extra 0.5x the Fair Labor Standards Act requires for hours past 40 in a workweek. On a $22 wage, an overtime hour pays $33, of which $11 is premium. Some states, notably California, also trigger overtime after 8 hours in a single day.
The distinction became a tax matter in 2025: the One Big Beautiful Bill Act made qualified overtime compensation, defined as the FLSA-required premium, deductible from federal income tax for 2025 through 2028, capped at $12,500 ($25,000 for joint filers) and phasing out above $150,000 of income ($300,000 joint). The base-rate portion, FICA, and most state taxes are unchanged. The overtime pay calculator splits your overtime into the two parts and prices the deduction.
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Related terms: Supplemental Wages , Take-Home Pay , Tax Withholding
Last updated . Part of the FinExplained finance glossary .