Overtime Tax Refund Calculator: How Much Bigger Is Your 2026 Refund?

The overtime deduction does not shrink your paycheck withholding automatically. For most workers it shows up as a bigger refund when they file. Here is how to estimate that refund boost.

Why this shows up as a refund, not a bigger paycheck

Your employer's payroll withholding is not automatically adjusted for the new overtime deduction. Unless you specifically update your W-4 to account for it, the same amount of federal tax gets withheld from every paycheck as before the law changed. The deduction is instead claimed on Schedule 1-A when you file your tax return, which lowers your tax bill and, since you already had tax withheld all year at the old rate, produces a larger refund (or smaller balance due) at filing time.

What actually gets deducted

Only the "premium" half of time-and-a-half overtime pay is deductible, not your entire overtime paycheck. If your regular rate is $28 an hour, your overtime rate is $42, and the deductible portion is the $14 premium. The cap is $12,500 for single filers and $25,000 for married filing jointly, with the deduction phasing out above $150,000 single or $300,000 married income.

A worked example

A single worker earning $28 an hour who works 250 overtime hours in 2026 has an overtime premium of $14 per hour, or $3,500 total for the year. That whole $3,500 is deductible, well under the $12,500 cap. At the 12% bracket, that is $420 in extra federal refund compared to a world without this deduction, showing up when they file, not in their weekly check.

Want a bigger paycheck instead of a bigger refund?

You can adjust your W-4 with your employer to reduce withholding during the year, which puts more money in each paycheck instead of waiting for a refund. This does not change your total tax savings, only when you receive it. Talk to your payroll department about updating your W-4 if you would rather see the money now.

Frequently asked questions

Will my paycheck get bigger from the overtime deduction?

Not automatically. Withholding does not change on its own. The savings show up as a larger refund when you file, unless you adjust your W-4 with your employer to reduce withholding during the year.

How much extra refund will I get from the overtime deduction?

It depends on your overtime premium pay and tax bracket. Use the calculator above: multiply your deductible overtime premium by your tax bracket percentage for a rough estimate of the refund increase.

Is the whole overtime paycheck deductible, or just part of it?

Just part of it. Only the premium half above your regular rate is deductible. Your base pay for those hours is still taxed as ordinary income.

Does this deduction change how much Social Security tax is withheld?

No. Payroll taxes, including Social Security and Medicare, are withheld from your full overtime pay regardless of this deduction. Only federal income tax is affected. See what still comes out of your paycheck.