No Tax on Overtime Calculator (2026)

How the overtime deduction is calculated

The calculator follows the same four steps as Part III of IRS Schedule 1-A, the form you use to claim the deduction. On the IRS draft of the 2026 form, steps 1 to 3 are lines 16 to 27. On the 2025 form they were lines 14 to 21.

Find the premium part of your overtime. Federal law requires overtime at one and a half times your regular rate. Only the extra half counts.
Qualified overtime = regular hourly rate × 0.5 × overtime hours
If you only know your total overtime pay, divide it by 3 for time and a half, or by 4 for double time.
Apply the yearly limit. Take the smaller of your qualified overtime or $12,500. On a joint return the limit is $25,000.
Apply the income phase-out. If your modified adjusted gross income is over $150,000 ($300,000 joint), divide the amount over the line by $1,000, round down, and multiply by $100. Subtract that from the figure in step 2.
Deduction = smaller of (qualified overtime, limit) − $100 × whole thousands over the threshold
Work out the tax saved. The deduction lowers your taxable income. The calculator works out 2026 federal income tax twice, with and without it, and shows the difference.

Step 3 matters more than it looks. The reduction comes off your deduction, not off the limit. A worker with $3,000 of qualified overtime and income $30,000 over the threshold loses the whole deduction, because the $3,000 reduction wipes it out.

Worked examples

Each example uses the 2026 brackets and the standard deduction ($16,100 single, $32,200 joint).

A warehouse worker on $24 an hour

Single, 6 overtime hours a week for 50 weeks, which is 300 hours. Total income is $60,720.

Total overtime pay$10,800
Qualified overtime (the premium part)$3,600
Limit for this filing status$12,500
Reduction for income above the threshold$0
Deduction$3,600
Top tax rate on this income12%
Federal income tax saved$432

A married nurse on $38 an hour

Files jointly, 10 overtime hours a week for 48 weeks, which is 480 hours. Household income is $165,000.

Total overtime pay$27,360
Qualified overtime (the premium part)$9,120
Limit for this filing status$25,000
Reduction for income above the threshold$0
Deduction$9,120
Top tax rate on this income22%
Federal income tax saved$2,006

A lineman with income above the threshold

Single, $30,000 of overtime pay at time and a half, total income $172,500. That is $22,500 over the line, so 22 whole thousands and a $2,200 reduction.

Total overtime pay$30,000
Qualified overtime (the premium part)$10,000
Limit for this filing status$12,500
Reduction for income above the threshold−$2,200
Deduction$7,800
Top tax rate on this income24%
Federal income tax saved$1,872

Savings by hourly rate

Use this table for a quick read. The third column is the part of each overtime hour you can deduct, which is always half your regular rate.

Single filer, standard deduction, full-time at the regular rate plus overtime for 50 weeks, no other income. Tax year 2026.
Regular hourly rate	Time and a half rate	Deductible part of each overtime hour	Tax saved a year at 5 overtime hours a week	Tax saved a year at 10 overtime hours a week
$15	$22.50	$7.50	$225	$450
$18	$27.00	$9.00	$270	$540
$20	$30.00	$10.00	$300	$600
$22	$33.00	$11.00	$330	$660
$25	$37.50	$12.50	$375	$1,175
$28	$42.00	$14.00	$644	$1,540
$30	$45.00	$15.00	$825	$1,650
$35	$52.50	$17.50	$963	$1,925
$40	$60.00	$20.00	$1,100	$2,200
$45	$67.50	$22.50	$1,238	$2,586
$50	$75.00	$25.00	$1,394	$3,000

The saving jumps where extra income moves into a higher tax band. A deduction is worth more at 22% than at 12%.

What counts as qualified overtime

The rule is narrower than the name suggests. Overtime qualifies only when all of these are true:

Federal law requires it. It must be overtime the Fair Labor Standards Act (FLSA) requires, which means hours over 40 in a workweek for a non-exempt employee.
It is the premium part. Only the pay above your regular rate counts. Your regular rate for those hours is ordinary wages.
It is reported on a tax form. From 2026, employers must report qualified overtime on Form W-2, in box 12 with code TT. The IRS says you can deduct only an amount reported that way. In the rare case that a payer treats you as a contractor, it goes on Form 1099-NEC or Form 1099-MISC.

These do not count:

Overtime paid to workers who are exempt from FLSA overtime, even when a state law or a contract provides it.
Any pay above the federal requirement. With double time, only the half-rate part qualifies.
Daily overtime that a state requires when you have not passed 40 hours in the week.
Tips. They have their own deduction on the same form.

You also need a valid Social Security number, and married couples must file a joint return. If you are married and file separately, you cannot claim it.

What is still taxed

The deduction touches one tax only. Everything else works as before.

Social Security and Medicare. Both still apply to all overtime pay, at 7.65% combined for most employees.
The regular-rate part of overtime. Two thirds of time-and-a-half pay is ordinary taxable wages.
Withholding. Your employer still withholds federal income tax from overtime pay. You get the benefit when you file your return, as a larger refund or a smaller bill. You can give your employer a new Form W-4 if you want less withheld during the year.
State income tax. This is a federal deduction. States set their own rules, and yours may still tax overtime in full.

How to claim the deduction

Find your qualified overtime for the year. For 2026 it is the amount in box 12 of your Form W-2 with code TT. The box shows all of your qualified overtime, even if it is over the limit. If the figure looks wrong, the IRS says to ask your employer for a corrected form (Form W-2c). For 2025 it was not reported separately, so the IRS let workers calculate it from pay stubs. That relief was for 2025 only.
Fill in Part III of Schedule 1-A (Form 1040). You enter the full amount, and the form applies the limit and the phase-out.
Carry the total from Schedule 1-A to your Form 1040. You can do this whether you itemize or take the standard deduction.

Common mistakes

Deducting all overtime pay. Only the premium part counts. On time and a half, that is one third of what you were paid for those hours.
Expecting a bigger paycheck. The saving normally arrives at tax time, not on payday.
Treating the deduction as the saving. A $3,600 deduction saves $432 at a 12% tax rate, not $3,600.
Counting employer extras. Holiday premiums, shift pay and state daily overtime are not qualified unless the FLSA requires them as overtime.
Filing separately when married. That gives up the deduction completely.

Questions people ask

Is overtime tax-free in 2026?

No. "No tax on overtime" is a federal income tax deduction, not an exemption. You can deduct the premium part of your overtime, up to $12,500 a year ($25,000 on a joint return). The rest of your overtime pay is taxed as usual, and Social Security and Medicare still apply to all of it.

How much overtime can I deduct?

Only the extra "half" in time and a half. If your regular rate is $24 an hour and you are paid $36 for an overtime hour, $12 of that hour is deductible. The yearly limit is $12,500, or $25,000 if you are married and file jointly.

What is the income limit for the overtime deduction?

The deduction starts to shrink when your modified adjusted gross income passes $150,000, or $300,000 on a joint return. It drops by $100 for every full $1,000 above that line. At the maximum deduction it reaches zero at $275,000, or $550,000 for joint filers.

Do I still pay Social Security and Medicare tax on overtime?

Yes. The deduction only lowers federal income tax. Social Security (6.2%) and Medicare (1.45%) are still taken from overtime pay. Social Security stops only on wages above $184,500 for the year.

Does the deduction lower my state income tax?

Not automatically. This is a federal rule. Each state decides whether to follow it, and your state may still tax overtime in full, so check with your state tax agency.

Do salaried workers qualify?

Only if the Fair Labor Standards Act requires your employer to pay you overtime. Salaried staff who are exempt from federal overtime rules have no qualified overtime, even if their employer pays extra for long weeks.

Does double time count twice?

No. Federal law only requires time and a half, so the deductible part stays at half your regular rate for each overtime hour. On double-time pay, that is one quarter of what you were paid for those hours.

Can I claim it if I take the standard deduction?

Yes. You can claim the overtime deduction whether you itemize or take the standard deduction. You claim it on Schedule 1-A of Form 1040.

How long does the overtime deduction last?

It covers tax years 2025 through 2028. It ends after 2028 unless Congress extends it.

Sources

Figures last checked against these sources on October 10, 2026. This page gives general information and estimates, not tax, legal or financial advice.