US · Tax years 2025–2028
No tax on overtime calculator
Short answer
“No tax on overtime” is a federal income tax deduction for 2025 to 2028. Eligible employees deduct the premium part of FLSA overtime, the extra half in time and a half, up to $12,500 a year ($25,000 joint). It shrinks by $100 for each $1,000 of income over $150,000 ($300,000 joint). Social security and Medicare still apply.
| Line | Tax year 2026 |
|---|---|
| Qualified overtime (the premium only) | $3,750.00 |
| After the $12,500 cap | $3,750.00 |
| Income over $150,000 | $0.00 |
| Reduction: $100 per full $1,000 over | −$0.00 |
| Estimated deduction | $3,750.00 |
| Federal income tax it may save, at 22% | about $825.00 |
Worked examples
Three single filers, 2026. The first works 300 overtime hours in the year at a $25 regular rate. The second has a large overtime total and income just over the threshold. The third earns too much for any deduction to survive the phase-out.
| Line | 300 h at $25 | $15,000 premium | High income |
|---|---|---|---|
| Qualified overtime (premium) | $3,750 | $15,000 | $12,500 |
| After the $12,500 cap | $3,750 | $12,500 | $12,500 |
| Modified AGI | $70,000 | $160,500 | $275,000 |
| Over $150,000 | $0 | $10,500 | $125,000 |
| Reduction ($100 per full $1,000) | $0 | $1,000 | $12,500 |
| Deduction | $3,750 | $11,500 | $0 |
| Tax saved, estimate | $825 at 22% | $2,760 at 24% | $0 |
In the first example, 300 hours × half of $25 is $3,750. The overtime pay itself was 300 × $37.50 = $11,250, but $7,500 of that is straight time and stays taxable. For a single filer the deduction reaches zero at $275,000 of modified AGI, whatever the overtime: $125,000 over the threshold removes the whole $12,500. On a joint return it reaches zero at $550,000.
Who qualifies for the overtime deduction?
Employees paid overtime that the Fair Labor Standards Act requires, which in practice means non-exempt employees paid time and a half for hours over 40 in a workweek. The IRS lists these conditions:
- Qualified overtime compensation received in tax years 2025, 2026, 2027 or 2028.
- A valid social security number for whoever received the overtime.
- Married couples must file a joint return; married filing separately can't claim it.
- Available whether you itemize or take the standard deduction.
Salaried employees who are exempt from FLSA overtime, under the executive, administrative or professional exemptions for example, don't receive FLSA overtime, so they have nothing to deduct even if their employer pays extra for long hours. Federal employees can check block 35 of Standard Form 50: “N” means FLSA-eligible.
Which part of overtime pay counts?
Only the pay in excess of the regular rate for FLSA overtime hours: the half, not the whole time and a half. If you're paid double time, the qualified amount is still the FLSA's half; the extra half is ordinary pay. Daily overtime under a state law, such as California's hours over 8 in a day, counts only to the extent the FLSA would have required it, which means hours over 40 in the workweek.
| Part of the pay | Amount | Counts? |
|---|---|---|
| 40 regular hours × $20 | $800 | No |
| 10 overtime hours at straight time × $20 | $200 | No |
| 10 overtime hours × $10 premium | $100 | Yes |
| Total pay for the week | $1,100 | $100 counts |
A non-discretionary bonus raises the regular rate and so the premium. The overtime calculator shows each week's FLSA premium if you want to total it yourself.
Where to find your qualified overtime
- Tax year 2026 onward: Form W-2, box 12, code TT, the total qualified overtime compensation for the year. Employers report the whole amount, even above $12,500.
- Tax year 2025: employers weren't required to report it separately. Some showed it in box 14 or on a separate statement; otherwise work it out from pay stubs that list overtime hours and rates, using the Schedule 1-A instructions.
- A worker treated as a contractor but who is an employee under the FLSA: Form 1099-NEC or 1099-MISC. This is rare.
Pay stubs that show overtime on its own line, with hours and rate, make both jobs easier: the employee can check the premium, and the employer has a clean figure to total for box 12 in January.
2026 federal tax brackets for the estimate
The tax the deduction saves depends on your top bracket: the rate on your last dollars of taxable income. Taxable income is income after the standard deduction ($16,100 single, $32,200 joint, $24,150 head of household in 2026) or itemized deductions.
| Rate | Single: taxable income over | Married filing jointly: over |
|---|---|---|
| 10% | $0 | $0 |
| 12% | $12,400 | $24,800 |
| 22% | $50,400 | $100,800 |
| 24% | $105,700 | $211,400 |
| 32% | $201,775 | $403,550 |
| 35% | $256,225 | $512,450 |
| 37% | $640,600 | $768,700 |
This page is general information, not tax advice. It estimates the federal deduction from figures you enter; your return, and any further IRS guidance, decide the actual amount. PayDocs reads the $12,500 and $25,000 caps and the $150,000 and $300,000 thresholds as fixed for 2025 to 2028, as Schedule 1-A and the IRS pages state them; if the IRS changes them for a later year, the calculator will follow.
The official method, step by step
- Work out the qualified overtime: for each FLSA overtime hour (over 40 in a workweek), one half of the regular rate. From 2026 the employer reports the year's total in box 12 of Form W-2 with code TT.
- Take the smaller of that amount and $12,500, or $25,000 on a joint return (Schedule 1-A, line 15).
- Subtract $150,000 ($300,000 joint) from your modified adjusted gross income: adjusted gross income from Form 1040 line 11b plus any excluded foreign, Puerto Rico or American Samoa income.
- Divide what's left by $1,000 and drop any fraction, then multiply by $100. That is the reduction (lines 18 to 20).
- The deduction is the capped amount less the reduction, never below zero (line 21). The calculator then multiplies it by the federal tax bracket you pick to estimate the income tax it saves.
What this leaves out
- Your actual tax bill: the saving is the deduction times one bracket, an estimate rather than a full return
- Married filing separately (not allowed to claim), and a missing or invalid social security number
- Overtime that state law, a contract or company policy requires but the FLSA doesn't, such as California daily overtime under 40 hours a week
- State income tax: states decide for themselves whether to follow the federal deduction
- The no-tax-on-tips, car loan interest and senior deductions, which share Schedule 1-A
- Tax years 2027 and 2028 brackets, which the IRS hasn't published yet
Sources: IRS: What to know about the No Tax on Overtime deduction (premium only, $12,500 / $25,000 joint, phase-out over $150,000 / $300,000 MAGI, valid SSN, joint return if married; page reviewed 10 September 2026) (read October 7, 2026); Schedule 1-A (Form 1040) 2025, Part III, lines 14–21: the cap, MAGI over $150,000 ($300,000 joint), divide by $1,000 rounding down, times $100 (read October 7, 2026); IRS Notice 2025-69: qualified overtime compensation is overtime required under FLSA section 7 in excess of the regular rate; MAGI adds back sections 911, 931 and 933 exclusions (read October 7, 2026); IRS General Instructions for Forms W-2 and W-3 (2026): box 12 code TT, total amount of qualified overtime compensation (read October 7, 2026); IRS IR-2025-103 (9 October 2025): 2026 tax brackets, 10% to 37%, and standard deductions (read October 7, 2026).
No tax on overtime calculator: common questions
Is overtime tax-free now?
No. Overtime is still wages: income tax is withheld, and social security and Medicare apply in full. For 2025 to 2028 eligible employees can deduct the FLSA premium part on their federal return, up to $12,500 a year ($25,000 joint).
How much is the no tax on overtime deduction worth?
The deduction times your top federal bracket. A $3,750 deduction saves about $825 at 22%, or $450 at 12%. At the $12,500 cap it saves $2,750 at 22% and $3,000 at 24%, before any phase-out.
What is the income limit for the overtime deduction?
It starts to shrink once modified adjusted gross income passes $150,000, or $300,000 on a joint return: $100 less for each full $1,000 over. At the full $12,500 cap it reaches zero at $275,000 for a single filer and, at the $25,000 cap, $550,000 joint.
Does the deduction lower social security and Medicare tax?
No. It lowers federal taxable income only. Social security (6.2%) and Medicare (1.45%) are withheld from all overtime pay as before.
Do I have to itemize to claim it?
No. The IRS says it's available whether you itemize or take the standard deduction. You figure it on Schedule 1-A and attach that to Form 1040.
Can I get the benefit in my paycheck instead of at tax time?
Only by giving your employer a new Form W-4. Without one, the employer keeps withholding as before and the saving arrives as a smaller bill or a bigger refund when you file.
Does double time count as qualified overtime?
Only the half the FLSA requires. With double time for hours over 40, half of the regular rate per hour counts and the other half is ordinary pay. Double time for hours the FLSA doesn't cover, such as California hours over 12 in a day within a 40-hour week, doesn't count.
Where do I find my qualified overtime on my W-2?
From tax year 2026, in box 12 with code TT. For 2025 employers didn't have to report it separately, so use your pay stubs or any statement your employer gave you.
Paying overtime? Show it on the pay stub
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