No Tax on Overtime Calculator for 2026 and 2027
Short answer: You can deduct up to $12,500 ($25,000 if married filing jointly) of the overtime premium your employer paid because the Fair Labor Standards Act required it. The deduction shrinks by $100 for every $1,000 of modified AGI above $150,000 ($300,000 joint). It applies to tax years 2025 through 2028 and you do not have to itemize.
No tax on overtime calculator
How the overtime deduction is calculated
The calculator follows Part III of Schedule 1-A (Form 1040), the form the IRS created for this deduction. In plain English:
- Start with qualified overtime compensation. That is the part of FLSA-required overtime pay that exceeds your regular rate. For ordinary time-and-a-half, it is one third of the overtime check (the extra 0.5× portion).
- Apply the cap. The smaller of that amount or $12,500 ($25,000 for joint filers) is your starting deduction.
- Check your MAGI. If MAGI is at or under $150,000 ($300,000 joint), you are done. If not, subtract $150,000 (or $300,000) from your MAGI.
- Round down to whole thousands and multiply by $100. That is your phase-out reduction.
- Subtract the reduction from the capped amount. The result can't be below zero.
The deduction lowers your taxable income, not your AGI, and it is claimed on Schedule 1-A with the total carried to Form 1040. To estimate the dollars saved, we apply your federal brackets to the taxable income before and after the deduction. See the full walkthrough in How the No Tax on Overtime Deduction Works.
Worked examples
Example 1: hourly worker, single, full-time plus regular overtime
Maria earns a regular rate of $24 an hour and works 8 hours of FLSA overtime a week for 40 weeks. Her employer pays time-and-a-half. Her MAGI is $62,000 and she files as single for tax year 2026.
- Total overtime pay at 1.5×: 24 × 1.5 × 8 × 40 = $11,520
- Qualified overtime (the 0.5 premium only): 24 × 0.5 × 8 × 40 = $3,840
- Cap is $12,500, MAGI is under $150,000, so there is no reduction. Deduction: $3,840
- Her taxable income before the deduction is $45,900 (MAGI less the $16,100 standard deduction), putting her in the 12% bracket. Estimated federal tax savings: $461.
Example 2: married couple, large overtime, joint cap
A married couple filing jointly has $30,000 of qualified overtime between them and MAGI of $280,000.
- Joint cap is $25,000, so the starting deduction is $25,000.
- MAGI of $280,000 is below the $300,000 joint threshold, so there is no phase-out.
- Deduction: $25,000. The extra $5,000 above the cap gets no deduction.
Example 3: phase-out for a higher earner
A single filer has $10,000 of qualified overtime and MAGI of $158,400.
- Excess over $150,000: $8,400. Divided by $1,000 and rounded down: 8.
- Reduction: 8 × $100 = $800.
- Deduction: $10,000 − $800 = $9,200.
The most common mistakes
- Deducting the full overtime paycheck. Only the premium over your regular rate counts, not the straight-time part of overtime hours.
- Counting state-law or contract overtime. California-style daily overtime or a union's double-time provisions may not be required by the FLSA. Only the FLSA-required premium qualifies (details).
- Forgetting FLSA exemptions. If you are an exempt salaried employee you do not receive FLSA overtime, so there is no qualified overtime, whatever your employer pays.
- Filing separately. Married filing separately is not allowed for this deduction.
- Using the wrong MAGI. The phase-out uses MAGI from Schedule 1-A Part I, not your wages. See MAGI and phase-outs.
For 2025, employers were not required to report qualified overtime separately, and the IRS gave individuals alternative ways to compute it (Notice 2025-69). For 2026 and later, employers must report it, and the IRS says the 2026 Form W-2 uses box 12 code TT. Check your pay stubs for a year-to-date overtime premium figure to plan ahead.
Frequently asked questions
How much is the no tax on overtime deduction worth?
The deduction is up to $12,500 of qualified overtime ($25,000 on a joint return). Its value is that deduction multiplied by your marginal federal tax rate, so a 12% bracket worker with a full $12,500 deduction saves about $1,500 and a 22% bracket worker about $2,750 in federal income tax.
Does "no tax on overtime" mean my whole overtime paycheck is untaxed?
No. Only the premium portion that is more than your regular rate (the "half" in time-and-a-half) can be deducted, and only up to the annual cap. The IRS says that if your employer pays double time, only the one-half portion needed to satisfy the Fair Labor Standards Act is qualified. Social Security and Medicare taxes still apply.
Is overtime required by my state or union contract deductible?
Only overtime required by section 7 of the Fair Labor Standards Act counts. IRS Publication 6133 says amounts not required by the FLSA, for example because of state law or a union contract, are not deductible.
When does the deduction phase out?
It is reduced by $100 for each $1,000 (rounded down) that your modified adjusted gross income is above $150,000, or $300,000 if you file jointly, according to Schedule 1-A.
Do I need to itemize?
No. The deduction is available whether you itemize or take the standard deduction, and you claim it on Schedule 1-A.
Which tax years does it cover?
Tax years 2025 through 2028. The first returns that could claim it were the 2025 returns filed in 2026.
Where do I find my qualified overtime amount?
For 2026 and later, employers must report it separately; on Form W-2 it appears in box 12 with code TT. For 2025 employers did not have to report it separately, so many people used the methods in IRS Notice 2025-69 and the Schedule 1-A instructions.
Can married people filing separately claim it?
No. If you are married you and your spouse must file a joint return to claim the deduction, and you need a Social Security number valid for employment.
Sources and citations
Every dollar figure on this page was checked against the official pages below on November 14, 2026. If an agency updates its guidance, the agency page controls.
- IRS Fact Sheet FS-2025-03: Working Families Tax Cuts — Tax deductions for working Americans and seniors
- IRS Tax Tip 2026-06: How to take advantage of no tax on tips and overtime
- 2025 Schedule 1-A (Form 1040), Additional Deductions (IRS)
- IRS FS-2026-01: Questions and answers about the deduction for qualified overtime compensation
- IRS Publication 6133 (Rev. 3-26): tips and overtime deductions
- IRS: General Instructions for Forms W-2 and W-3 (2026)