OBBBA Overtime Tax Deduction Explained: How Travel Nurses Can Save $3,000+ in 2026

The One Big Beautiful Bill Act (OBBBA) introduced one of the most significant tax benefits for overtime workers in decades. For travel nurses who regularly work overtime, this new deduction can put up to $3,000 back in your pocket every year.

Here’s everything you need to know about the OBBBA overtime tax deduction and how to maximize it.

What is the OBBBA Overtime Tax Deduction?

Starting in 2026, the OBBBA allows workers to deduct overtime “premium” pay from their taxable income. This is a below-the-line deduction, meaning you can claim it regardless of whether you itemize or take the standard deduction.

Key Numbers

What Counts as “Overtime Premium”?

This is crucial and often misunderstood. The deduction only applies to the premium portion of overtime pay—not the entire overtime wage.

Example:

• Base hourly rate: $50
• Time-and-a-half pay: $75/hr (1.5x)
• Premium portion: $25/hr (the 0.5x only)

Only that $25/hr premium is deductible. The other $50/hr is your regular wage and doesn’t qualify.

How Much Can Travel Nurses Actually Save?

Let’s look at realistic scenarios based on typical travel nursing contracts.

Scenario 1: Moderate Overtime (8 hours/week)

• Base rate: $50/hr
• Overtime hours: 8/week
• Contracts per year: 3 (39 weeks total)
• Total OT premium: 8 hrs × $25 × 39 weeks = $7,800
• Tax savings (24% bracket): $1,872

Scenario 2: Heavy Overtime (12 hours/week)

• Base rate: $50/hr
• Overtime hours: 12/week
• Contracts per year: 3 (39 weeks total)
• Total OT premium: 12 hrs × $25 × 39 weeks = $11,700
• Tax savings (24% bracket): $2,808

Scenario 3: Maximum Deduction

• Base rate: $55/hr
• Overtime hours: 16+/week
• OT premium reaches the $12,500 cap
• Tax savings (24% bracket): $3,000

Does This Affect Tax-Free Stipends?

No. The OBBBA overtime deduction is completely separate from your tax-free housing and M&IE stipends. Your stipends remain tax-free (assuming you maintain a qualifying tax home), and you can also claim the OBBBA deduction on top of that.

This is actually a double benefit for travel nurses—you already get tax-free stipends that staff nurses don’t, and now you get an additional deduction on overtime.

Understanding the Phase-Out

If you’re a high earner, your deduction may be reduced. The phase-out works proportionally:

Single Filer Example:

• Phase-out range: $150,000 to $275,000 ($125,000 spread)
• If MAGI = $200,000 (40% through the range)
• Deduction reduced by 40%
• Max deduction: $12,500 × 60% = $7,500

Good News for Most Travel Nurses: Most travel nurses earn between $80,000-$130,000 in taxable wages (not including tax-free stipends), well below the phase-out threshold. Only CRNA-level earners or those with significant other income typically face phase-out concerns.

How to Claim the Deduction

What You’ll Need

1. W-2 form showing total overtime hours and pay
2. Documentation of overtime premium calculations
3. Form 1040 (the deduction will have a specific line)

Employer Requirements

Starting in 2026, employers are required to report:

• Total overtime hours worked
• Total overtime pay
• The premium portion (0.5x for time-and-a-half, 1.0x for double-time)

Your travel nursing agency should provide this breakdown on your W-2 or a supplemental statement.

Combining OBBBA with Other Deductions

The OBBBA deduction stacks with other tax benefits travel nurses already enjoy:

Strategies to Maximize the Deduction

1. Prioritize High-Overtime Contracts

When comparing contracts, factor in the OBBBA deduction:

• A contract with guaranteed OT now has additional tax value
• 8 hrs/week of OT at $50 base = $780/mo in deductible premium
• At 24% bracket, that’s $187/month in tax savings

2. Track Your Hours Carefully

Keep your own records of:

• Regular hours vs. overtime hours
• Any double-time hours (the full 1.0x premium is deductible)
• California daily OT (overtime after 8 hours)

3. Time Your Contracts Strategically

If you’re close to the $12,500 cap, you don’t need to work more OT for this deduction. But if you’re under the cap, taking an extra shift late in the year could boost your deduction.

4. Consider Filing Status

Married filing jointly doubles the cap to $25,000 and raises the phase-out threshold to $300,000. If your spouse also works overtime, you can each contribute to the household’s combined cap.

Common Questions

Does this apply to double-time?

Yes. For double-time pay (2x base rate), the premium portion is 1.0x your base rate, which is fully deductible up to the cap.

What about California daily overtime?

California OT rules require overtime after 8 hours per day. This overtime qualifies for the OBBBA deduction, potentially giving California travel nurses higher deductions than nurses in other states working the same total hours.

Do I need to itemize?

No. The OBBBA is a below-the-line deduction available regardless of whether you take the standard deduction or itemize.

What if my agency doesn’t report OT separately?

Contact your agency’s payroll department. The law requires them to provide this breakdown. If they don’t comply, you may need to calculate it from your pay stubs.

Calculate Your Savings

Use our OBBBA Overtime Tax Deduction Calculator to see exactly how much you can save based on your specific situation. Enter your hourly rate, overtime hours, and filing status to get a personalized estimate.

The Bottom Line

The OBBBA overtime deduction is a meaningful tax benefit for travel nurses who work overtime. At maximum savings of $3,000/year, it’s worth understanding and claiming—but it won’t transform your financial picture. Think of it as a nice bonus on top of the already significant tax advantages travel nurses enjoy.

Key Takeaways:

• Deduct up to $12,500 of overtime premium (0.5x portion only)
• Save up to $3,000/year at the 24% bracket
• No itemization required
• Doesn’t affect your tax-free stipends
• Most travel nurses won’t face phase-out issues