No Tax on Overtime Calculator
Estimate your qualified overtime deduction and potential federal income tax savings. Enter your pay and overtime hours, or use the qualified overtime amount reported by your employer.
Calculate your overtime deduction
Only overtime required by federal FLSA rules generally qualifies. The deductible premium is usually limited to 0.5× the regular hourly rate for eligible overtime hours, even if your employer pays double time. The multiplier selector is illustrative; it does not change the federally qualifying premium.
For 2026 onward, check W-2 Box 12, code TT, or the applicable qualified reporting statement. This is not total overtime wages.
Use your projected full-year household MAGI, including overtime wages. For most taxpayers this is AGI; certain foreign-income exclusions must be added back.
Enabled for joint filers; do not double count.
What Does “No Tax on Overtime” Actually Mean?
For tax years 2025 through 2028, qualifying workers may claim a federal income tax deduction for the portion of overtime compensation required by the Fair Labor Standards Act (FLSA) that exceeds their regular pay rate.
Despite the popular name, this law does not make all overtime wages tax-free. Federal income tax withholding and Social Security and Medicare taxes generally still apply to wages.
Examples: How Much Overtime Is Deductible?
Example 1: $25 per Hour, 10 Overtime Hours Each Week
A worker earning $25 per hour works 10 FLSA-qualifying overtime hours weekly for 50 weeks.
The overtime rate is $37.50 per hour, but only the additional $12.50 hourly premium generally qualifies.
10 hours × 50 weeks × $12.50 = $6,250 in estimated qualified overtime compensation.
With income below the phaseout threshold and no other limitation, the estimated deduction is $6,250. At an assumed 12% marginal federal income tax rate, the simplified tax savings estimate is $750.
Example 2: Double Time Does Not Mean a Larger Deduction
Suppose the same worker earns double time ($50 per hour). If federal law requires only time-and-a-half, the additional employer-paid premium above the FLSA-required amount generally does not increase the qualified overtime deduction.
Federal eligibility and regular-rate calculations can be more complex than this basic example.
Example 3: Income Above the Phaseout Threshold
A single filer with $10,000 of qualified overtime and $155,500 in modified adjusted gross income exceeds the $150,000 threshold by $5,500.
Under the completed-$1,000-increments calculation, five increments produce a $500 reduction, leaving an estimated $9,500 deduction. Verify the applicable tax-year IRS instructions.
2026 and 2027 Overtime Deduction Limits
| Single, head of household, qualifying surviving spouse | $12,500 cap |
| Married filing jointly | $25,000 cap |
| MAGI phaseout begins — most eligible nonjoint filers | $150,000 |
| MAGI phaseout begins — joint filers | $300,000 |
| Married filing separately | Not eligible |
The $25,000 joint limit is per joint return, not per spouse. Verify current IRS instructions before filing.
How to Find Qualified Overtime on Your W-2
For tax year 2026 and later, employers generally must separately report qualified overtime compensation. For W-2 employees, the IRS identifies Box 12, code TT.
Use the employer-reported amount when preparing your actual tax return, subject to eligibility, annual caps, and income phaseouts. If the reported amount is incorrect, contact your employer about a correction.
Tax year 2025 has special transitional reporting relief. Follow the applicable 2025 Schedule 1-A instructions rather than assuming the 2026 reporting method applies.
What Counts—and What Doesn’t?
Qualifying overtime generally must be compensation required under federal FLSA section 7 for a covered, nonexempt employee.
Overtime paid solely because of state law, an employment contract, a union agreement, or a voluntary employer policy may not qualify.
Special situations include daily overtime before 40 weekly hours, holiday premiums, double time, blended regular rates, bonuses affecting the regular rate, and certain federal employees.
The calculator’s hourly mode assumes a straightforward FLSA-eligible hourly worker. For complex compensation, use employer-reported qualified overtime and appropriate tax guidance.
Frequently Asked Questions
Is all overtime pay tax-free in 2026 or 2027?
No. The deduction generally applies only to the federally required overtime premium above regular pay, subject to income and annual limits.
Does the deduction apply to the entire time-and-a-half rate?
No. At $20 per hour, time-and-a-half is $30 per hour. The qualifying premium is generally $10 per hour, not the full $30.
How much can married couples deduct?
Eligible married couples filing jointly may deduct up to $25,000 of combined qualified overtime compensation per joint return, subject to the income phaseout.
Does overtime still have Social Security and Medicare tax?
Generally yes. This provision is a federal income tax deduction, not an exemption from payroll taxes.
What if I get double time or overtime under state law?
Only the federally required FLSA overtime premium generally qualifies. Additional premiums paid voluntarily or solely under state law generally do not increase the deduction.
Where is qualified overtime reported for 2026?
For W-2 employees, the IRS identifies Box 12, code TT. Contact your employer if the amount appears incorrect.
Does this automatically increase my tax refund?
No. A deduction reduces taxable income. Its actual effect depends on your tax liability, withholding, credits, and other deductions.
Can I claim it with the standard deduction?
Yes. Eligible taxpayers may claim the qualified overtime deduction whether they itemize or take the standard deduction.
Does the calculator work for 2025 overtime?
It can provide an estimate, but 2025 has special transitional reporting rules. Consult the applicable IRS Schedule 1-A instructions.
Put Your Overtime Tax Savings to Work
If your estimated savings are meaningful, decide where that money can make the biggest difference: building an emergency fund, reducing costly debt, or reaching a savings goal.
Explore the EveryDollarGrows Budgeting Guide or use the Free Savings Goal Planner .
Official Sources and Methodology
This educational calculator follows the federal qualified overtime deduction under Internal Revenue Code Section 225 and IRS guidance available in November 2026.
The calculator does not determine FLSA eligibility, calculate a complete federal income tax return, account for all tax credits, or replace employer records and professional tax preparation.
- IRS: Qualified Overtime Deduction FAQs
- IRS: Updated Overtime Fact Sheet
- IRS: Schedule 1-A Explanation
- 26 U.S.C. Section 225
Editorial note: EveryDollarGrows provides financial education, not individualized tax or legal advice. Review current IRS instructions and consult a qualified tax professional for complex overtime pay.