Calculation Methodology
Our calculator models the 2026 "One Big Beautiful Bill Act" (OBBBA) proposal. Below is the technical breakdown of the assumptions and rules used to generate your estimates.
The Deduction Model
- Overtime Rate: We assume a standard 1.5× multiplier on your calculated hourly rate based on a 40-hour work week.
- Annual Caps: The maximum federal deduction is limited to $12,500 for Single filers and $25,000 for Married Filing Jointly (MFJ).
Income Limits
- Phase-out Threshold: Eligibility begins to decrease once MAGI exceeds $150,000 (Single) or $300,000 (MFJ).
- Full Phase-out: Benefits are typically reduced to zero for incomes exceeding $200k (Single) / $400k (MFJ).
The Formula
HourlyRate = (WeeklyRegularPay / 40)
WeeklyOTPay = HourlyRate * 1.5 * OTHours
AnnualOTIncome = WeeklyOTPay * 52
// Apply OBBBA Proposal Logic:
FinalDeduction = Min(AnnualOTIncome, Cap) * PhaseOutMultiplier
WeeklyOTPay = HourlyRate * 1.5 * OTHours
AnnualOTIncome = WeeklyOTPay * 52
// Apply OBBBA Proposal Logic:
FinalDeduction = Min(AnnualOTIncome, Cap) * PhaseOutMultiplier
Critical Exclusions
Users should note that our estimates focus strictly on the Federal Income Tax component of your paycheck. Under current legislative frameworks:
- FICA (Social Security & Medicare): A flat 7.65% is still applied to all earnings.
- State Income Tax: Unless your state explicitly "conforms" to the new federal overtime rules, state taxes will still apply.
- Municipal/Local Taxes: City and school district taxes are generally independent of federal OBBBA rules.