Your real federal savings from the 2026 No Tax on Overtime deduction. This tool counts only the part that actually qualifies, the FLSA half-premium, then applies the cap and the income phase-out, so your number is honest instead of inflated.
Educational tool, not tax advice. SavingsClub is not a licensed tax advisor. Estimates only, based on IRS Notice 2025-69 rules for tax years 2025 to 2028. Confirm your figures with a tax professional.
Enter your details and press Calculate. Your overtime deduction breakdown will appear here.
The phrase makes it sound like overtime pay became tax-free. It did not. What the law created is a federal income tax deduction for qualified overtime, added by the 2025 tax act and in effect for the 2025 through 2028 tax years. It is retroactive to January 1, 2025, and it is scheduled to expire after 2028 unless Congress extends it.
A deduction lowers the income you are taxed on. It does not hand you your overtime back tax-free. If you deduct $5,000 of overtime premium and you are in the 22 percent bracket, you save about $1,100 in federal income tax, not $5,000. That is the single biggest misunderstanding about this rule, and the calculator above is built to show you the real number.
This is where most people, and most calculators, get it wrong. The deduction applies only to the premium portion required by the Fair Labor Standards Act, which is the extra half of time-and-a-half pay. It is not your full overtime paycheck.
If you are paid double time (2x), it does not help you here. Only the FLSA-required half-premium qualifies. The extra amount above time-and-a-half is not deductible under current IRS guidance, so your total pay goes up but your deductible amount stays the same. The calculator handles this automatically: pick double time and it still deducts only the qualifying half.
Two limits decide how much of your premium you can actually deduct.
You can deduct at most $12,500 if you file single or head of household, and up to $25,000 if you are married filing jointly. For a married couple, the $25,000 is the combined limit for both spouses, not $25,000 each.
The deduction shrinks once your modified adjusted gross income (MAGI) passes $150,000 for single and head of household filers, or $300,000 for joint filers. For every $1,000 of MAGI above the threshold, your maximum deduction drops by $100. It reaches zero at about $275,000 (single) or $550,000 (joint). For most workers, MAGI is simply the income on your Form 1040.
Even when you qualify for the full deduction, your overtime is not free of every tax.
The rule is narrower than the headlines suggest.
You generally qualify if you are an hourly or other non-exempt employee who is covered by the FLSA and receives time-and-a-half for hours over 40 in a workweek.
You generally do not qualify if any of these apply: you are married and file separately; you are a salaried employee who is exempt from FLSA overtime; your extra pay comes only from a state law or union agreement rather than the FLSA; or your MAGI is above the phase-out ceiling. Most true independent contractors do not qualify either, because the overtime must be FLSA-required.
You claim the deduction on Schedule 1-A, a form that attaches to Form 1040, and you can take it whether you itemize or use the standard deduction.
Employers were not required to break out overtime separately, so your qualified amount may appear in Box 14 of your W-2, on a separate employer statement, or not at all. If it is not provided, you calculate it from your pay stubs: total your FLSA overtime hours and multiply by your regular rate times 0.5.
Employers must report your qualified overtime compensation on your W-2 in Box 12 using code TT, so you can transfer that figure straight to Schedule 1-A. Always check the number against your own records to be sure it captures your full benefit.
Earns $22 an hour, works about 8 overtime hours a week for 50 weeks. The deductible premium is $22 × 0.5 × 400 hours = $4,400. With a MAGI well under $150,000 and a 12 percent bracket, that is roughly $528 in federal tax saved. The full overtime pay stays on the W-2 and still owes FICA.
Earns $40 an hour and picks up double-time shifts. Even though she is paid 2x, only the FLSA half-premium counts, so her deductible amount is $40 × 0.5 × her overtime hours, not the full double-time pay. Choosing "double time" in the calculator shows this gap clearly.
Combined MAGI of $340,000 with $25,000 of overtime premium between them. They are $40,000 over the $300,000 threshold, so the cap drops by $40,000 ÷ $1,000 × $100 = $4,000. Their deduction is $21,000 rather than the full $25,000.
Not exactly. The No Tax on Overtime provision is a federal income tax deduction, not a full exemption. For tax years 2025 through 2028, eligible workers can deduct the FLSA-required overtime premium (the extra half of time-and-a-half pay) from their federal taxable income, up to a yearly cap. Your overtime is still subject to Social Security and Medicare taxes, and often state income tax.
You can deduct your qualified overtime premium up to $12,500 if you are single or head of household, or up to $25,000 if you are married filing jointly. Only the half-time premium counts, not your full overtime pay. The deduction also phases out once your modified adjusted gross income passes $150,000 (single) or $300,000 (joint).
Only the premium portion required by the Fair Labor Standards Act qualifies, which is the extra 0.5 times your regular rate on hours over 40 in a week. If your regular rate is $20 and overtime pays $30, only the $10 premium per hour is deductible, not the full $30. If you are paid double time, only the FLSA half-premium qualifies, not the extra amount above time-and-a-half.
No. The deduction only reduces federal income tax. Social Security tax of 6.2 percent (up to the annual wage base) and Medicare tax of 1.45 percent still apply to your full overtime pay, including the premium portion. Many states also continue to tax overtime in full, because not every state has adopted the federal change.
Married people who file separately are not eligible. Salaried employees who are exempt from FLSA overtime generally do not qualify, and neither does extra pay that comes only from state law or a union agreement rather than the FLSA. Workers whose modified adjusted gross income is above $275,000 (single) or $550,000 (joint) are fully phased out.
You claim it on Schedule 1-A, which attaches to Form 1040, and you can take it whether you itemize or use the standard deduction. For the 2025 tax year, your qualified overtime may appear in Box 14 of your W-2 or on a separate employer statement, or you may need to calculate it from pay stubs. For 2026 and later, employers report it on your W-2 in Box 12 using code TT.
This overtime tax calculator provides estimates for educational purposes based on the No Tax on Overtime deduction rules for tax years 2025 to 2028, including IRS Notice 2025-69. It is not tax advice, and your actual deduction depends on your full return, your state, and future IRS guidance. Content is researched and drafted using AI tools with human review before publication. SavingsClub is not a licensed tax advisor. For your specific situation, consult a CPA, enrolled agent, or tax attorney. Read full disclaimer.