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Overtime Calculators

No tax on overtime calculator

Rules checked October 19, 2026

Where does your overtime figure come from?

MAGI is the figure on Form 1040, line 11b (2025), plus any excluded foreign or territory income (Schedule 1-A, line 1).

No tax on overtime deduction, (estimate)

$0

Qualified amount
After the cap
Income phase-out
Deduction
Deduction $0See details ↓

Follows Schedule 1-A (Form 1040); tax saving from the IRS brackets and standard deduction (Rev. Proc. 2024-40, 2025-32). Sources: IRC §225, IRS FS-2026-13 (August 2026). Federal income tax only; Social Security, Medicare and state income tax still apply. Rules checked October 19, 2026.

The deduction is up to $12,500 a year ($25,000 joint) of the premium half of federally required overtime, for tax years 2025 to 2028, reduced by $100 per $1,000 of income over $150,000 ($300,000 joint).

What counts as qualified overtime

Only the extra half of time and a half that the Fair Labor Standards Act requires: half your regular rate for each hour over 40 in a workweek (IRC 225(c)). Your straight-time pay for those hours does not count, and neither does anything above 1.5x. A delivery driver earning $24 an hour who works 46 hours has 6 × $12 = $72 of qualified overtime that week, though the paycheck shows 6 × $36 = $216 of overtime pay.

Overtime paid under a state law, a union contract or company policy, but not required by the FLSA, does not qualify. That includes California daily overtime in a week under 40 hours, double time, and weekend or holiday premiums (IRS FS-2026-13, Q16). If you are exempt under the FLSA, none of your overtime counts (Q4). Exception: if your employer pays overtime under a different FLSA method, such as a hospital or residential-care 8/80 plan (29 USC 207(j)), a police or fire work period (207(k)) or public-agency comp time (207(o)), the premium paid under that method counts instead (IRS FS-2026-13, Q17). This calculator uses the 40-hour week, so on those plans use the figure in W-2 box 12, code TT.

How the deduction is worked out

  1. Take your qualified overtime for the year. From 2026 it is the figure in W-2 box 12, code TT.
  2. Cap it at $12,500, or $25,000 if married filing jointly (IRC 225(b)(1)).
  3. Subtract $100 for each full $1,000 of modified AGI over $150,000 ($300,000 joint). A partial $1,000 does not count: Schedule 1-A says to round down. Some calculators round up and understate the deduction.
  4. The result, if above zero, goes on Schedule 1-A and reduces your federal taxable income.

The deduction reduces taxable income, so the tax saved depends on your bracket. The calculator works it out with the IRS brackets and standard deduction for the year (Rev. Proc. 2024-40 for 2025, Rev. Proc. 2025-32 for 2026), including when the deduction spans two brackets. A nurse with $6,000 of qualified overtime who stays in the 12% bracket saves about $720; wholly in the 22% bracket, about $1,320.

2025 versus 2026 to 2028

For 2025 employers did not have to report qualified overtime separately, so the IRS lets you use your own pay stubs and records (Notice 2025-69). IRS Notice 2025-69 lists reasonable methods: use the premium amount if your pay statement shows it; if it shows only total overtime pay at time and a half, use one-third of that total; if you were paid double time, use half of the amount above your regular rate. The calculator's estimate option does the same: hourly rate × hours over 40 × weeks, halved. From tax year 2026 the amount in box 12, code TT is the most you can deduct (FS-2026-13, Q20). If you think it is wrong, ask your employer for a corrected W-2c.

What it does not do

It does not lower Social Security or Medicare tax, and it does not change federal withholding unless you give your employer a new Form W-4 (IRS FS-2026-13, Q9). State income tax is separate: several states do not follow the federal deduction, so this calculator covers federal income tax only.

Sources and the date each was read are on the test cases page and in each answer below. To work out the overtime pay itself, use the overtime calculator. Tips have their own deduction: see no tax on tips.

Frequently asked questions

How much is the no tax on overtime deduction?

Up to $12,500 a year, or $25,000 on a joint return, for tax years 2025 through 2028. Only the premium half of overtime that federal law requires counts. The deduction drops by $100 for every full $1,000 of modified AGI over $150,000 ($300,000 joint).

When does no tax on overtime start and end?

It applies to overtime paid in tax years 2025, 2026, 2027 and 2028, so you first claim it on the 2025 return you file in early 2026. No deduction is allowed for tax years beginning after December 31, 2028 (IRC 225(g)).

Who qualifies for no tax on overtime?

Employees who are non-exempt under the Fair Labor Standards Act and receive overtime it requires, with a Social Security number valid for work. Married couples must file jointly. Exempt employees get nothing, even if their employer or state law pays them overtime.

Is overtime really tax free?

No. It is a deduction from federal taxable income, not an exemption. Overtime is still subject to Social Security, Medicare and federal withholding, and to state income tax unless your state adopts the deduction.

Does double time or California daily overtime count?

Only the amount the FLSA requires counts: half your regular rate for each hour over 40 in the workweek. IRS FS-2026-13 gives the example of 10 overtime hours at $20 paid at double time: $100 qualifies, not $200. Hospital 8/80 plans and police or fire work periods count differently (Q17).

How does it work for 2025 and for 2026?

For 2025, W-2s were not required to show the amount, so you may work it out from your pay records (IRS Notice 2025-69). From 2026 your employer reports it in W-2 box 12, code TT, and you can deduct only what is reported there.

Did no tax on overtime pass?

Yes. It is section 225 of the Internal Revenue Code, added by Public Law 119-21 (the One Big Beautiful Bill Act), signed on July 4, 2025. You claim it on Schedule 1-A of Form 1040.

Is the $12,500 limit per person or per return?

Per return: up to $12,500 of qualified overtime on an individual return, and $25,000 on a joint return, whichever spouse earned it (IRS FS-2026-13, Q2).

Do salaried workers qualify?

Yes, if they are non-exempt under the FLSA and are paid overtime it requires. Pay type alone does not decide it; being exempt does (IRS FS-2026-13, Q4). A salaried employee earning under $684 a week is generally non-exempt.

Do I need to itemize?

No. The deduction is available whether you itemize or take the standard deduction (IRS FS-2026-13, Q1).