How Much More You’ll Take Home With Tax-Free Overtime
Written by
Andrew Lisa
Edited by
Levi Leidy
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
President Donald Trump’s One Big Beautiful Bill Act (OBBBA) will bring tax savings to millions of American workers, although for many, the benefits will be offset by cuts to social programs such as Medicaid and SNAP.
However, some workers stand to gain more than others.
According to the IRS, the bill provides a special benefit for employees who work more than 40 hours per week, allowing them to deduct up to $12,500 worth of overtime pay through tax year 2028, or $25,000 for joint filers. The deduction begins to phase out for individuals earning $150,000, or $300,000 for joint filers.
For the average American who earns substantial time-and-a-half, four-figure annual savings are possible for the next three years.
The Bill’s Proponents Say the Average Worker Will Save $1,400
The White House states that the average hourly worker who clocks overtime hours stands to save “nearly $1,500 annually.” The House Ways and Means Committee puts the number at a comparable $1,400.
However, since the GOP-controlled House passed the bill and the president signed it in the White House, both entities have a vested interest in positive public perception — but President Trump and his allies aren’t the only ones crunching the numbers.
Deduction vs. No Deduction: An Example
The nonprofit Bipartisan Policy Center, which Media Bias Fact Check deems “highly credible,” gives the following example of how a hypothetical overtime worker earning $30,000 would save $600.
| Income and Taxes | Without Overtime Deduction | With Overtime Deduction |
| Annual Base Wages | $30,000 | $30,000 |
| Wages at Overtime Rate | $5,000 | $5,000 |
| Standard Deduction | $16,000 | $16,000 |
| Overtime Deduction | $0 | $5,000 |
| Taxable Income | $19,000 | $14,000 |
| Federal Tax Liability | $2,042 | $1,442 |
Most Middle-Class Workers Will Max Out at $2,750
The hypothetical earner who saved $600 was in the 12% tax bracket. The bulk of the middle class, however, falls into the 22% bracket, which includes incomes ranging from $48,475 to $103,350.
For those among them who deducted the entire $12,500, the maximum savings from the overtime deduction would be $2,750.
However, several influencing factors determine how much any given taxpayer will get back, including filing status, income, hours of overtime and whether they itemize deductions. Additionally, keep in mind that the deduction only impacts your federal income tax on qualifying overtime, not state, local or payroll taxes.
More From GOBankingRates
