No tax on overtime calculator

What counts as qualified overtime

The deduction covers qualified overtime compensation: the part of your pay that is above your regular rate and that section 7 of the Fair Labor Standards Act requires. In practice that is the extra half of time and a half, on hours over 40 in a workweek.

In the example, 6 overtime hours a week for 40 weeks is 240 hours. Each one pays $36.00 at time and a half, but only the $12.00 premium qualifies, so the qualified amount is $2,880.00, not the $8,640.00 of overtime pay. At a 22% bracket the deduction saves about $633.60 in federal income tax.

Overtime that federal law does not require does not count: California’s daily overtime, double time a contract pays, or overtime for an employee who is exempt from the FLSA. When an employer pays double time for hours over 40, only the half the FLSA requires qualifies.

The cap and the income phase-out

The deduction is capped at $12,500 a year, or $25,000 on a joint return. It then shrinks by $100 for each full $1,000 of modified adjusted gross income above $150,000 ($300,000 joint).

A single filer with $5,000 of qualified overtime and income of $162,500 is 12 full thousands over the line, so the deduction drops by $1,200.00 to $3,800.00. For that filer it reaches zero at an income of $200,000. The calculator shows where your own deduction runs out.

Finding your number

Tax year 2026 onward. Your employer reports qualified overtime on Form W-2 in box 12 with code TT. Pick W-2 amount in the calculator and enter it.

Tax year 2025. Employers did not have to report the figure separately. Some put it in box 14 of the W-2 or on a separate statement. If yours did not, IRS Notice 2025-69 lets you use your own records, such as pay stubs. If they show only total overtime paid at time and a half, one third of that total is the premium; pick Total pay and the calculator divides by three.

Claiming it

The deduction goes on Schedule 1-A of Form 1040, and you can take it whether you itemize or not. You need a Social Security number valid for employment on the return. If you are married, you must file jointly to claim it.

It lowers federal income tax only. Social Security and Medicare are still due on every dollar of overtime, and whether your state follows the federal deduction depends on your state’s tax law. It applies for 2025 through 2028 unless Congress extends it.

Want to see how a single week’s hours turn into this premium? The weekly overtime calculator shows the qualified amount for any week you enter.