Tax year 2026 · Runs in your browser · Nothing uploaded

No Tax on Overtime Calculator (2026 and 2025)

For 2025–2028 you can deduct the overtime premium your employer is required to pay under the FLSA — usually the “half” of time-and-a-half — up to $12,500 ($25,000 married filing jointly), reduced above $150,000 MAGI ($300,000 joint). It is a federal income-tax deduction, not tax-free pay: Social Security and Medicare still apply.

How the no tax on overtime deduction works (2025–2028)

The deduction is claimed on Schedule 1-A, Part III, and you can take it whether you itemize or use the standard deduction. It lowers your federal taxable income; it doesn’t change what is withheld for Social Security and Medicare. Married couples must file jointly, and whoever earned the overtime needs a Social Security number valid for employment.

Calculator

Tax year

Filing status

Qualified overtime

I have my W-2 (box 12, code TT) Estimate from my pay

Your W-2 box 12, code TT

Spouse’s W-2 box 12, code TT

I’m an FLSA non-exempt employee (overtime-eligible under federal law)

Modified AGI (MAGI)Form 1040 line 11b, plus any excluded foreign or territory income

Standard or itemized deduction (optional)Used only for the tax-saved estimate

I have a Social Security number valid for employment

Qualified amount: $0
After the cap: $0
Phase-out reduction: $0
Your deduction: $0
Federal income tax saved (est.): —

Doesn’t reduce FICA (7.65%). Whether your state follows this deduction depends on your state. Claimed on Schedule 1-A, Part III.

This calculator gives an estimate for federal income tax only, based on IRS guidance as of 2026-11-10. It is not tax advice. Social Security, Medicare and state taxes are not reduced. Confirm your figures with your W-2/1099 and the Schedule 1-A instructions, or a tax professional.

What counts as qualified overtime (and what doesn’t)

Counts: the part of FLSA overtime pay above your regular rate. At $20/hour with time-and-a-half, $10 of each $30 overtime hour.
Double time: only the 0.5× the FLSA requires. The extra 0.5× doesn’t count.
Doesn’t count: overtime paid only because of state law (such as daily overtime) or a union contract, and any overtime paid to someone who isn’t covered by the FLSA or is exempt from its overtime rules.

2026 change: use W-2 box 12 code TT

Starting with 2026 Forms W-2, employers report qualified overtime in box 12 with code TT. For tax years after 2025 the IRS says you can’t deduct more than the code TT amount. If it’s missing or too low, you need a corrected W-2 (Form W-2c) from your employer — see W-2 box 12 code TT explained. For 2025, employers didn’t have to report it separately and you could figure the amount yourself under Notice 2025-69.

Limits and income phase-out

	Single, HoH, surviving spouse	Married filing jointly
Maximum deduction	$12,500	$25,000
Phase-out starts (MAGI)	$150,000	$300,000
Fully phased out at a full cap	$275,000	$550,000
Married filing separately	Not allowed

The deduction falls by $100 for each full $1,000 of MAGI over the threshold: subtract the threshold, divide by 1,000 and round down to a whole number. For example, $12,400 over → 12 → $1,200 off.

Worked examples

Hourly worker. $25/hour, 5 overtime hours a week for 50 weeks = 250 hours. Qualified amount = 0.5 × $25 × 250 = $3,125. Single, AGI $60,000, no phase-out. Taxable income goes from $43,900 to $40,775, all in the 12% bracket — about $375 saved.
Double time. $30/hour, 10 hours over 40 paid at 2×. Only 0.5 × $30 × 10 = $150 counts, not $300.
Joint phase-out. Married filing jointly, code TT totals $14,000, MAGI $320,000. $20,000 over → $2,000 off → $12,000 deduction.
State daily overtime. A California employee works 10 hours one day but 38 hours that week. Those 2 daily-overtime hours aren’t required by the FLSA, so they don’t count.

How to claim it on Schedule 1-A (Part III)

Enter your qualified overtime in Part III of Schedule 1-A, apply the cap, then the MAGI reduction, and carry the result to your Form 1040. Attach Schedule 1-A to Form 1040, 1040-SR or 1040-NR.

Methodology

Deduction = max(0, min(qualified overtime, cap) − floor(max(0, MAGI − threshold) / 1,000) × $100). The tax-saved estimate is your 2026 federal tax before minus after the deduction, using the 2026 rate tables and standard deduction from Rev. Proc. 2025-32 (Single $16,100, MFJ $32,200, HoH $24,150) — not deduction × marginal rate, which is wrong across a bracket edge. It treats MAGI as your AGI and ignores credits and capital-gain rates. No 2025 tax-saved estimate is shown. Every calculation happens in your browser.

No tax on overtime FAQ

Is overtime tax-free in 2026?

No. For 2025–2028 you can deduct the FLSA-required overtime premium (usually the “half” of time-and-a-half) from federal taxable income, up to $12,500 ($25,000 joint). Social Security, Medicare and, in most cases, state income tax still apply.

How much will I save with no tax on overtime?

Your savings equal the federal tax on the deductible amount at your bracket. A worker with $3,125 of qualified premium in the 12% bracket saves about $375. Use the calculator for your numbers.

What is code TT on my 2026 W-2?

Box 12 code TT is the total qualified overtime compensation your employer paid you. From tax year 2026 it is the amount you use for the deduction; you can’t deduct overtime above what is reported there.

My W-2 doesn’t show code TT (or shows the wrong amount). What do I do?

Ask your employer for a corrected W-2 (Form W-2c). The IRS says a substitute W-2 (Form 4852) can’t be used for this deduction, and if TT is overstated you may only deduct what you were actually paid.

Does double time qualify?

Only the portion the FLSA requires. If you are paid 2× for hours over 40, only 0.5× your regular rate counts.

Does California daily overtime count?

Not by itself. Only overtime required by the federal FLSA (generally hours over 40 in a workweek) qualifies; overtime required only by state law or a union contract does not.

I’m salaried — can I take it?

Only if you are FLSA non-exempt and are paid FLSA overtime. Exempt employees’ overtime doesn’t qualify.

Can married couples filing separately claim it?

No. Married taxpayers must file jointly, and the person who earned the overtime needs a Social Security number valid for employment.

Do I need to itemize?

No. You can take it with the standard deduction. It’s claimed on Schedule 1-A, Part III.

What’s the income limit?

The deduction drops by $100 for every full $1,000 of MAGI over $150,000 ($300,000 joint).

Sources and last updated

Last updated: 2026-11-10 · Tax year: 2026 · Maintained by the WattFlow team. No CPA or EA has reviewed this page.

Changelog

2026-11-10 — First published.