What does 'no tax on overtime' mean?

"No tax on overtime" means eligible workers can deduct the premium portion (the extra half) of their Fair Labor Standards Act (FLSA) overtime pay from their federal taxable income, reducing their year-end tax bill, thanks to a temporary deduction in the 2025 "One Big Beautiful Bill" for tax years 2025-2028. It's a federal tax deduction, not an immediate withholding change, allowing up to a $12,500 deduction (or $25,000 if filing jointly) on the extra pay for hours over 40, not the entire overtime paycheck.

How would no taxes on overtime work?

The "no tax on overtime" provision, part of the 2025 One Big Beautiful Bill Act (OBBBA) (effective 2025-2028), works as a federal income tax deduction, not a complete exemption, allowing workers to deduct up to $12,500 (or $25,000 joint) of the premium pay (the "half" in time-and-a-half) from their taxable income. It applies to non-exempt, hourly workers, retroactively for 2025 earnings, phasing out for higher earners, and requires employers to report it on W-2s. 

Is overtime always taxed?

Your tax bracket is determined by your total annual income, which consists of both regular and overtime pay, and your filing status. There is no separate tax on overtime pay. If overtime pushes your income into a higher tax bracket, only the portion above the threshold will be taxed at a higher rate.

What is the law for overtime pay in Arizona?

Arizona follows federal Fair Labor Standards Act (FLSA) rules for overtime, generally requiring nonexempt employees to earn 1.5 times their regular rate for hours worked over 40 in a workweek, with exceptions for certain public sector roles like law enforcement. Key takeaways: federal FLSA (1.5x pay after 40 hours) applies unless a state law offers greater protection (not the case in AZ), overtime is based on a 7-day workweek, and specific rules exist for tipped workers and state employees. 

What states do not tax overtime pay?

As of late 2025/early 2026, Alabama is the only state with a current, implemented law exempting overtime pay from state income tax (until mid-2025), while a recent federal law (the "One Big Beautiful Bill") allows a federal tax deduction for overtime (and tips) through 2028, impacting state policies, with some states like Michigan adopting similar rules or proposing them, but many others not yet following. 

No tax on overtime: What workers need to know about the new tax break

Did Trump say no tax on overtime?

Yes. The no tax on overtime bill was included in the One Big Beautiful Bill that President Trump signed into law in July 2025.

How much an hour is $70,000 a year after taxes?

$70,000 a year is about $33.65 per hour before taxes, but after federal, state (varies), and FICA taxes, your take-home hourly pay will likely be closer to $25 - $28 per hour, depending heavily on your location, filing status, and deductions, though using a reliable tax calculator with your specific details is best for accuracy. 

How does OT work in AZ?

Arizona follows federal Fair Labor Standards Act (FLSA) rules for overtime, generally requiring nonexempt employees to earn 1.5 times their regular rate for hours worked over 40 in a workweek, with exceptions for certain public sector roles like law enforcement. Key takeaways: federal FLSA (1.5x pay after 40 hours) applies unless a state law offers greater protection (not the case in AZ), overtime is based on a 7-day workweek, and specific rules exist for tipped workers and state employees. 

Is it illegal to work more than 12 hours a day in Arizona?

Arizona does not have a specific overtime law. Thus, certain employers are required to pay their employees in accordance with the Fair Labor Standards Act (FLSA). The FLSA requires covered employers to pay nonexempt employees overtime pay for any hours worked beyond 40 hours in a workweek.

How much will no tax on overtime save me?

The "no tax on overtime" rule (2025-2028) lets you deduct the extra half of your time-and-a-half pay (up to $12,500) from federal income tax, not eliminate all tax; employers still withhold Social Security/Medicare, and you get a refund based on your tax bracket and total income, potentially getting back more if you adjust W-4 withholdings for this new deduction. To estimate your refund, calculate the "extra half," cap it at $12,500, and multiply by your marginal tax bracket (e.g., 22% bracket gets roughly $2,750 back on $12,500), but you must file to claim it. 

How much tax will I pay if I do overtime?

You pay regular income tax rates on overtime, but new 2025-2028 US law lets you deduct up to $12,500 (or $25k joint) of the extra half of overtime pay from federal income tax when you file, reducing your tax bill, though payroll taxes (FICA) still apply, and you might see higher initial withholding. The deduction lowers your overall taxable income for the year, but your total income (regular + overtime) still determines your marginal tax bracket. 

At what point is overtime not worth it?

Overtime stops being worth it when the extra pay doesn't compensate for the loss in well-being, leading to burnout, health issues, strained relationships, and reduced productivity, often around 50 hours a week or when significant tax/benefit impacts occur. Key indicators are feeling constantly exhausted, making mistakes, missing family time, and noticing your net earnings decrease due to higher tax brackets or losing eligibility for income-based assistance. 

Why is no tax on overtime a bad idea?

No tax on overtime is considered bad policy by many economists because it creates tax inequity, potentially costs the government billions in lost revenue, encourages employers to rely on overtime instead of hiring, and can be exploited by highly paid individuals, ultimately shifting the tax burden and potentially harming public services and future Social Security benefits. It's seen as a loophole that benefits a few while creating complex tax code issues and distorting labor markets, say experts from the Tax Foundation and the Center for Economic and Policy Research, as noted by the Tax Foundation. 

Why is overtime so heavily taxed?

The IRS doesn't have a special "overtime tax rate" that penalizes you for working extra shifts. Your employer is just withholding more dollars because you earned more dollars. Here's why: That withholding is an estimate based on the assumption that you'll earn this higher amount every paycheck for the entire year.

Is overtime taxed at 40%?

No, overtime isn't taxed at a flat 40%; it's taxed at your regular marginal income tax rate, but a new 2025-2028 federal law allows a large deduction for the premium portion (time-and-a-half) of overtime, meaning less is taxed at year-end, not immediately on your paycheck, leading to confusion, though payroll taxes (FICA) still apply. 

When would no tax on overtime go into effect?

When does the “No Tax on Overtime” deduction start? The “no tax on overtime” deduction is retroactively effective on January 1, 2025. So, if you qualify, you can claim the deduction for the first time on your federal income tax return for the 2025 tax year (which you'll file in 2026).

What is OT for $20 an hour?

For someone earning $20/hour, overtime pay (typically 1.5x the regular rate) is $30/hour, calculated by multiplying the $20 regular rate by 1.5, and this rate applies to all hours worked over 40 in a workweek, not on weekends/holidays unless hours exceed 40. To find total pay, calculate regular pay (40 hrs x $20) and add overtime pay (overtime hours x $30). 

Is working 80 hours a week illegal?

Working 80 hours a week isn't federally illegal in the U.S. for most adults, but it triggers mandatory overtime pay (time-and-a-half) for non-exempt employees under the Fair Labor Standards Act (FLSA) for hours over 40, and some states or specific professions (like pilots, truckers) have stricter rules or rest period requirements, while salaried exempt employees can be required to work these hours without extra pay if they meet criteria, though some states like California have meal/rest break rules for long days. 

Is overtime taxable in Arizona?

The law creates a tax deduction for overtime pay through 2028. Previously, overtime wages were treated like regular wages as far as the federal government was concerned. Now, an individual's first $12,500 of extra overtime pay will be tax-deductible. The income limit on the provision is $150,000.

What is the overtime rule in Arizona?

Arizona follows federal Fair Labor Standards Act (FLSA) rules for overtime, generally requiring nonexempt employees to earn 1.5 times their regular rate for hours worked over 40 in a workweek, with exceptions for certain public sector roles like law enforcement. Key takeaways: federal FLSA (1.5x pay after 40 hours) applies unless a state law offers greater protection (not the case in AZ), overtime is based on a 7-day workweek, and specific rules exist for tipped workers and state employees. 

Does an employer have to pay overtime after 40 hours?

Yes, for most non-exempt employees in the U.S., employers must pay overtime at 1.5 times their regular rate for hours worked over 40 in a workweek, as mandated by the Fair Labor Standards Act (FLSA). Some employees are exempt, like certain executives or professionals, and some states have stricter laws, but the federal rule is generally 40 hours/week. 

What is $90,000 a year hourly?

$90,000 a year is approximately $43.27 per hour, based on a standard 40-hour workweek (2080 hours/year), calculated by dividing your annual salary by 2080. This figure can vary slightly if you work more or fewer hours, but it's the common benchmark for converting yearly pay to hourly wages for full-time employment. 

Is a 70k salary rich?

No, $70k a year isn't considered "rich" in the U.S. but is a solid, middle-class income, often above average, that allows for comfortable living in most areas, though it can feel tight in high cost-of-living cities like NYC or SF, especially with a family, but provides good living in lower-cost areas. "Rich" typically implies a much higher income, putting you in the upper-middle or upper class, while $70k is a good income for a single person or couple without children, depending on location and expenses. 

What is $40 an hour annually?

$40 an hour is $83,200 per year, assuming a standard 40-hour work week for 52 weeks, calculated by multiplying $40 (hourly rate) x 40 (hours/week) x 52 (weeks/year). This is a gross annual salary before taxes and deductions, which would be about $6,933 per month.