OBBBA Tax Savings Calculator

• Qualified Overtime: only the extra overtime premium, defined as OT Hours × (Hourly Rate × 0.5).
• Tip deduction: up to $25,000.
• OT premium deduction cap: $12,500 (Single/HOH) or $25,000 (MFJ).
• MAGI phase-out: deduction reduced by 10% of income above threshold.
• Actual tax savings: computed from federal bracket tax before vs after deduction.

This structure is designed to show not just deduction size, but real after-formula tax impact.

To estimate federal tax savings correctly, we first subtract the 2026 standard deduction by filing status before applying bracket tax.

We calculate MAGI as regular wages + full overtime pay + tips + other income. If MAGI exceeds the threshold, deductions are reduced by 10% of the excess income.

Instead of static story blocks, we added interactive use cases below the calculator so you can inspect each flow as:

• Income → wages, overtime, tips, other income
• Deduction → base tip + base OT premium − phase-out reduction
• Actual Tax Savings → federal tax before vs after OBBBA deduction

A frequent mistake is treating all overtime pay as deductible. Under this model, only the premium piece counts.

• If your hourly rate is $30, overtime pay is $45 per hour.
• The deductible piece is only $15 per OT hour (0.5 × $30).
• For 400 qualified OT hours, QOC is $6,000 (400 × $15), not $18,000.

This single distinction is often the difference between a realistic estimate and an inflated one.

If you want smoother filing and fewer surprises, keep these records in one folder:

• W-2 details: regular wages, reported tips, and overtime breakdown if available.
• Payroll summaries: year-to-date pay stubs showing overtime hours and rates.
• Employer reporting records: tip reports and any corrected payroll statements.
• Other income forms: 1099-INT/1099-DIV/1099-NEC for MAGI accuracy.

Better records do not change the law, but they materially reduce filing friction and audit risk.

Households using this calculator as a planning tool typically do three things:

1. Run a base case with current income and pay mix.
2. Run a stress case with +$10k to +$20k other income to measure phase-out damage.
3. Adjust withholding or quarterly payments if projected savings materially changes year-end balance due.

The point is not perfect prediction. The point is avoiding a bad surprise in April.

This estimator focuses on federal income tax impact from OBBBA deductions only.

• It does not estimate payroll taxes (Social Security/Medicare).
• It does not model state income tax treatment.
• It does not include credits, itemized deductions, or AMT interactions.
• It assumes entered overtime hours and tips are qualified under the law.

If you are comparing multiple levers (not only OBBBA deductions), these tools pair well:

• Tax Refund Estimator for refund vs amount owed.
• Self-Employment Quarterly Tax Estimator for safe-harbor planning.
• Standard vs Itemized Deductions for deduction strategy.
• Student Loan Interest Deduction Calculator for additional above-the-line optimization.

Use this output as a planning number when deciding overtime availability, withholding adjustments, and year-end tax strategy.

If your household is close to a phase-out threshold, rerun two scenarios (base case and +$10,000 income) to see how quickly your deduction benefit decays.