How it works for nurses
The 2026 "No Tax on Overtime" deduction (IRC §225) lets eligible workers deduct the premium portion of federally-required overtime — the extra "half" of time-and-a-half. Most hourly, non-exempt nurses who work over 40 hours qualify. Salaried/exempt nurse managers generally don't, since the deduction only covers FLSA Section 7 overtime.
Premium only — not your whole OT check
This trips people up. If your regular rate is $40/hr, an overtime hour pays $60 — the $20 premium is what's deductible, not the full $60. A quick rule of thumb: at 1.5×, the premium is about one-third of your total overtime pay. Your W-2 will report the premium separately from tax year 2026.
What it does and doesn't do
- Cuts your federal income tax on the premium, up to the cap.
- Does not remove Social Security/Medicare, and the base hourly portion isn't deductible.
- Phases out above $150,000 (single) / $300,000 (joint) of income.
Stack it with other 2026 breaks (if you have kids or paid car-loan interest) in the Total Tax Change calculator.
Nurse FAQ
Do nurses qualify for No Tax on Overtime?
Yes if you're hourly/non-exempt and paid federal time-and-a-half. Salaried exempt roles generally don't qualify.
How much can a nurse deduct?
The premium only — the extra "half" — up to $12,500 (single) / $25,000 (joint). Roughly one-third of your total OT pay at 1.5×.
Does this remove the tax taken from my OT checks?
It cuts federal income tax on the premium. Social Security and Medicare still apply.
Sources
- IRS — OBBBA deductions
- One Big Beautiful Bill Act §70202 (IRC §225); FLSA Section 7
Disclaimer: Educational estimate based on IRC §225 and IRS guidance as of June 2026. Not tax advice. FedCalc is independent and not affiliated with the U.S. government or IRS.