No Tax on Overtime Calculator

The no tax on overtime deduction lets you deduct the premium portion of overtime the Fair Labor Standards Act requires your employer to pay — the "half" in time-and-a-half — up to $12,500 per return ($25,000 joint) for tax years 2025 through 2028. The deduction shrinks by $100 for each full $1,000 of modified AGI above $150,000 ($300,000 joint). Enter only the premium below, not your total overtime pay.

This calculator is for informational purposes only. It gives an estimate based on the numbers you enter; the deduction you can actually claim is determined on Schedule 1-A when you file.

What counts as qualified overtime compensation?

Qualified overtime compensation is overtime pay required by section 7 of the Fair Labor Standards Act that is in excess of your regular rate. The IRS states the weekly formula in Fact Sheet 2026-13 (Q12):

FLSA hours over 40 in the workweek × one-half × your FLSA regular rate = qualified overtime for that week

If you are paid exactly time-and-a-half, the qualified amount is one-third of your overtime pay. The other two-thirds is your normal hourly wage for those hours, and it stays fully taxable.

Double time, daily overtime and union contracts

Only the amount the FLSA requires counts. In the IRS example (Q16), a worker with a $20 regular rate works 10 overtime hours and the employer pays double time: $400 for those hours. The FLSA would have required $300 — $200 of straight time plus a $10 premium for 10 hours — so the qualified amount is $100, not $200.

The same logic applies to overtime paid under a state law or a collective bargaining agreement for hours the FLSA does not cover, such as hours over 8 in a day when the week stays at or under 40. The employer has to test the pay against the FLSA rules; anything above the federal minimum premium is ordinary wages for this deduction.

Bonuses and shift differentials

A bonus or shift differential is not overtime by itself. But under the FLSA, nondiscretionary bonuses and differentials are part of the regular rate (29 U.S.C. § 207(e)), which raises the half-time premium your employer owes on overtime hours. Your employer's figure should already reflect that.

Where to find your number

Tax year 2026 and later. Employers must report qualified overtime on Form W-2 in box 12 with code TT (FS-2026-13, Q10). The law only allows a deduction for amounts included on that statement, so you cannot deduct more than box 12 code TT shows, and Form 4852 (substitute W-2) does not work. If you believe the amount is understated, ask your employer for a corrected Form W-2c. If you are an FLSA employee who was paid on a 1099, the amount appears in box 1d of Form 1099-NEC or box 14 of Form 1099-MISC.

Tax year 2025. Employers were not required to report the amount separately. Many used box 14, an online payroll portal, or a separate statement. If you only know your total time-and-a-half pay, divide it by three to get the premium; Notice 2025-69 explains the other methods the IRS accepts for 2025.

How the calculation works

The official worksheet is Schedule 1-A, Part III (lines 14–21). The calculator follows the same steps:

1. Qualified overtime. The premium you enter (line 14c).
2. Cap. The smaller of that amount or $12,500 ($25,000 if married filing jointly) — line 15.
3. Phase-out. Subtract $150,000 ($300,000 joint) from your modified AGI. Divide by $1,000 and drop any fraction (1.9 becomes 1). Multiply by $100 — lines 17–20.
4. Deduction. Line 15 minus the phase-out, but not below zero — line 21.
5. Tax savings. The deduction times your marginal federal rate.

Modified AGI here is your AGI plus any foreign earned income or Puerto Rico income you excluded. For most wage earners it equals Form 1040 line 11; the MAGI calculator handles the exceptions.

Because the reduction is subtracted from your capped overtime — not from the $12,500 cap — a smaller overtime amount disappears at a lower income. A single filer with $5,000 of qualified overtime loses it all at $200,000 of MAGI ($50,000 over × $100 per $1,000 = $5,000), while a filer with $12,500 or more keeps something until $275,000.

Worked examples

Hospital nurse, single

Regular rate $40, 6 overtime hours a week for 50 weeks = 300 hours.

• Overtime pay at $60: 300 × $60 = $18,000
• Qualified premium: 300 × $20 = $6,000
• MAGI $95,000 is below $150,000, so no phase-out
• Deduction: $6,000; at 22%, about $1,320 less federal income tax

Entering the $18,000 by mistake would show the full $12,500 cap and an estimated $2,750 saving — more than double the real figure.

Two overtime earners, married filing jointly

Premiums of $9,000 and $7,500 = $16,500, under the $25,000 joint cap. MAGI is $310,400.

• Over the threshold: $310,400 − $300,000 = $10,400 → 10 full thousands
• Phase-out: 10 × $100 = $1,000
• Deduction: $16,500 − $1,000 = $15,500; at 24%, about $3,720

Single filer above the cap and in the phase-out

Qualified premium $14,000; MAGI $182,700.

• Line 15: the smaller of $14,000 or $12,500 = $12,500
• Over the threshold: $32,700 → 32 full thousands → $3,200
• Deduction: $12,500 − $3,200 = $9,300; at 24%, about $2,232

Savings at common premium amounts

Single or head of household with MAGI at or below $150,000:

To see how the deduction changes your bracket rather than assuming one rate, run your taxable income through the federal tax bracket calculator with and without it.

Who cannot claim it

• Married filing separately. Married taxpayers must file jointly (FS-2026-13, Q25).
• No valid SSN. The worker who received the overtime needs a Social Security number valid for employment, issued by the return due date. On a joint return where both spouses had overtime, both SSNs must be on the return.
• FLSA-exempt employees. Executive, administrative and professional employees (including K-12 teachers), outside sales staff, certain computer professionals, some commissioned retail employees, and owner-employees with a bona fide 20% stake who help manage the business are not owed FLSA overtime, so any overtime they receive does not qualify.
• Self-employed people. A true independent contractor has no FLSA overtime. A 1099 only works when the worker is legally an FLSA employee treated as a contractor for tax purposes.

What the deduction does not change

• Payroll taxes. Social Security and Medicare still apply to every overtime dollar (IRS Q&A).
• AGI. The deduction is taken on Form 1040 line 13b, after AGI. It does not lower AGI-based limits such as IRA deduction or education credit phase-outs.
• Withholding. Your employer still withholds on overtime. To get the benefit through the year instead of at refund time, enter the expected deduction in Step 4(b) of a new Form W-4; the tax withholding calculator helps size that number.
• State income tax. The deduction is federal. Whether your state follows it depends on state law.

Overtime, tips and the other new deductions

Overtime sits in Part III of Schedule 1-A, next to tips (Part II), car loan interest (Part IV) and the senior deduction (Part V). Each has its own cap and phase-out, and you can claim all that apply on one return. A server who works overtime can deduct the overtime premium here and the qualified tips in the no tax on tips calculator; the tips vs. overtime comparison explains how the two interact. To total every OBBBA deduction at once, use the Working Families Tax Cuts savings estimator or browse the Working Families Tax Cuts hub. The no tax on overtime guide covers the background of the law in more depth.

How to read your results

• Your overtime tax deduction is the Schedule 1-A line 21 estimate.
• Phase-out reduction appears only when MAGI is above the threshold; it is always a multiple of $100.
• Federal tax savings is the deduction times the rate you picked. If the deduction moves part of your income into a lower bracket, the true saving is a little smaller.
• The scenario table keeps your MAGI fixed and changes only the premium, so you can see where the cap starts to bind.

Common mistakes

1. Entering total overtime pay. The most common error, and it typically triples the premium.
2. Counting double time in full. Only the FLSA half-time premium counts.
3. Using pay stubs instead of the W-2 for 2026. If box 12 code TT is missing or short, get a W-2c; the IRS will not accept your own calculation.
4. Filing separately. A married couple filing separate returns gets no deduction at all.
5. Expecting lower payroll tax. FICA is unchanged; only income tax goes down.