Estimator only, built from IRC §225 and the IRS sources cited below. Not tax advice. Runs entirely in your browser.
How this is calculated
| Step | Rule |
|---|---|
| 1. Premium only | Qualified overtime = the amount above your regular rate that FLSA §7 requires for hours over 40 in a week — the “half” in time-and-a-half. From total time-and-a-half pay, the premium is exactly one third (total ÷ 3) |
| 2. Cap | At most $12,500 per return, $25,000 if married filing jointly |
| 3. Phase-out | Minus $100 per $1,000 (or part of $1,000) of MAGI above $150,000 ($300,000 joint) |
| 4. Tax saved | Federal income tax without the deduction minus tax with it, on the bracket tables under this page |
What does not count: overtime your employer pays voluntarily above the FLSA requirement — double-time, weekend premiums in a short week, or overtime required only by state law or a union contract — is not qualified overtime compensation unless FLSA §7 requires it. Salaried exempt workers have no FLSA overtime and nothing to deduct. The deduction is above the line (Schedule 1-A), needs a Social Security number, and married taxpayers must file jointly. Overtime pay still owes Social Security and Medicare tax in full. From 2026, employers report qualified overtime on Form W-2, Box 12, Code TT — that reported figure is your starting point; IRS Notice 2025-69 gives estimation methods (including the ÷3 method above) for 2025, when separate reporting wasn't required.
Worked example (check it by hand)
Single filer, 2026, total income $55,000 including $6,000 of FLSA overtime premium. Under the cap and the phase-out threshold, so the deduction is the full $6,000. Tax without it: $55,000 − $16,100 = $38,900 taxable → $1,240 + 12% × $26,500 ($3,180) = $4,420. With it: $49,000 − $16,100 = $32,900 taxable → $1,240 + 12% × $20,500 ($2,460) = $3,700. Tax saved: $720 — $6,000 × the 12% marginal rate. The calculator's default inputs reproduce this example.
Also earn tips? The tips deduction is separate and stacks with this one — up to another $25,000. Run the tips calculator →
Frequently asked questions
My overtime is double-time. What counts?
Only the FLSA-required premium: the first “half” above your regular rate for hours over 40. The extra your employer adds voluntarily on top does not qualify.
Is all of my overtime pay deductible?
No — and this is where most headlines mislead. On $30/hour time-and-a-half over a $20 base, $20 of each hour is regular pay for extra hours and stays fully taxable; the deductible piece is the $10 premium.
Where does the number come from on my W-2?
From 2026: Box 12, Code TT. For 2025, use pay stubs or the Notice 2025-69 methods — total time-and-a-half pay divided by 3 is the IRS's reasonable-method example.
Sources
- Internal Revenue Code §225 (deduction for qualified overtime compensation), added by the One Big Beautiful Bill Act, P.L. 119-21 — premium-only definition tied to FLSA §7, $12,500 / $25,000 caps, phase-out, 2025–2028.
- IRS Fact Sheet FS-2026-13 (Aug 6, 2026) — the premium portion only; 2026 W-2 Box 12 Code TT reporting.
- IRS Notice 2025-69 — 2025 estimation methods and substantiation.
- IRS Schedule 1-A and instructions — claiming the deduction, itemizers and non-itemizers.
- IRS Revenue Procedure 2025-32 (2026) and 2024-40 as increased by the Act (2025) — brackets and standard deductions used for the tax-saved estimate.
Last updated October 20, 2026. Estimator only — not tax advice.
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