No Tax on Overtime calculator

Estimate your federal deduction for qualified overtime compensation, the "No Tax on Overtime" deduction from the One Big Beautiful Bill Act. It covers only the extra half of time and a half, up to $12,500 a year ($25,000 on a joint return), for tax years 2025 through 2028.

Your overtime for the year (on a joint return, add both spouses' amounts)
Qualified overtime 300 h × $24.00 × ½
$3,600.00
Federal limit Single
$12,500.00
Income phase-out MAGI not over $150,000
$0.00
Estimated deduction Tax year 2026, Schedule 1-A
$3,600.00

From 2026, your deduction can't be more than the qualified overtime on your W-2s in box 12, code TT.

Estimate, not tax advice. Your W-2 and your tax return decide the deduction.

How the deduction is calculated

The calculator follows Part III of Schedule 1-A (Form 1040), where you claim the deduction:

  1. Qualified overtime. Only the overtime pay the federal Fair Labor Standards Act (FLSA) requires above your regular rate counts: for each hour over 40 in a workweek, half your regular rate. Paid at exactly time and a half, that's one third of your overtime pay.
  2. The limit. The smaller of your qualified overtime and $12,500, or $25,000 if you're married filing jointly.
  3. The income phase-out. If your modified adjusted gross income (MAGI) is over $150,000 ($300,000 joint), $100 comes off for each full $1,000 above it. Only whole thousands count: $1,500 over takes off $100.
  4. The deduction. What's left. You can take it whether you itemize or take the standard deduction.

For most W-2 workers, MAGI is the adjusted gross income on Form 1040. More on the limits in No Tax on Overtime rules.

Examples

Single, overtime most weeks

You earn $24 an hour and work about 6 hours of overtime a week for 50 weeks: 300 overtime hours. Your overtime pay is 300 × $36 = $10,800. The qualified part is 300 × $12 = $3,600, one third of the overtime pay. With a MAGI of $62,000, the estimated deduction is $3,600.

Married filing jointly, both with overtime

One spouse has $9,000 of qualified overtime and the other $7,500. Together that's $16,500, under the $25,000 joint limit. With a MAGI of $180,000, below $300,000, the estimated deduction is $16,500.

Single, over the limit and the income threshold

You have $14,000 of qualified overtime and a MAGI of $163,500. The limit cuts it to $12,500. MAGI is $13,500 over $150,000, which is 13 full thousands, so $1,300 comes off. The estimated deduction is $11,200.

What the deduction is worth

A deduction lowers your taxable income, not your tax dollar for dollar. Roughly, your federal income tax goes down by the deduction times your tax bracket: at 12%, a $3,600 deduction is about $432 less tax; at 22%, about $792. If you owe no federal income tax, the deduction doesn't add to your refund.

Social Security and Medicare taxes still apply to all your overtime pay, and federal income tax is still withheld from it. Whether your state follows the deduction depends on your state's tax law.

Questions

Is overtime tax-free now?

No. Overtime is still part of your wages, in box 1 of your W-2, and income tax is withheld from it. From 2025 through 2028 you can deduct the qualified part, the extra half, when you file your federal return.

Can I get the money in my paycheck instead of at tax time?

Your employer doesn't change your withholding on its own. You can give your employer a new Form W-4 that counts the expected deduction in step 4(b). The IRS Tax Withholding Estimator can help you work out the amount.

We're married. Can we file separately?

Not for this deduction. If you're married, you have to file a joint return to claim it. If both of you had overtime, both Social Security numbers go on the return.

Do I need a Social Security number?

Yes. The person who received the overtime needs a Social Security number that's valid for employment and issued before the return's due date.

What changed in 2026?

From tax year 2026, employers report qualified overtime on Form W-2 in box 12, code TT, and you can't deduct more than that amount. If the code TT amount is too low, you need a corrected W-2 (Form W-2c) from your employer. For 2025, most W-2s didn't show it, so people worked it out from their pay stubs. See W-2 box 12, code TT.

Does double time or California daily overtime count?

Only the half the FLSA requires for hours over 40 in a workweek. Double time, daily overtime under state law and overtime from a union contract count only up to that amount. Examples are in What counts as qualified overtime.

I'm salaried. Can I take it?

Only if you're overtime-eligible (non-exempt) under the FLSA and get overtime pay. Employees who are exempt from FLSA overtime, such as many executive, administrative and professional employees, can't take the deduction, even if they get overtime pay under a contract or company policy.

Sources

This calculator gives an estimate and isn't tax advice. Your W-2 and your tax return determine your deduction. Halfback is not affiliated with the IRS or any government agency.