No Tax on Overtime Calculator
The deduction covers only the extra part of overtime pay (the “half” in time-and-a-half), not all overtime pay. Maximum $12,500 per year ($25,000 if married filing jointly); it phases out above $150,000 income ($300,000 joint). (IRS, page last reviewed September 10, 2026.)
Last updated: October 9, 2026
Estimate your deduction
For example 6 hours a week × 20 weeks = 120.
Modified adjusted gross income, as figured on your tax return.
Only used to show a rough tax effect. We have no tax tables.
Result
This is an estimate, not tax advice. Qualified overtime is only what the FLSA requires above your regular rate, and MAGI has its own definition. Check the IRS page and ask a tax professional. Nothing you type leaves your browser.
What counts as qualified overtime compensation?
According to the IRS, qualified overtime compensation is overtime pay required under section 7 of the Fair Labor Standards Act (FLSA) that exceeds the regular rate at which you are employed. If you are paid “one and one-half times” your regular rate for an hour of overtime, the “half” portion is qualified overtime compensation. If your employer pays more than the FLSA requires, only the part needed to meet the FLSA requirement counts. People who are not eligible for FLSA overtime do not receive qualified overtime compensation, even if a union contract or other law gives them overtime pay (IRS questions and answers, A1).
The limits at a glance
| All other filers | Married filing jointly | |
|---|---|---|
| Maximum deduction per year | $12,500 | $25,000 |
| Phase-out starts when MAGI is above | $150,000 | $300,000 |
| Reduction | $100 for each full $1,000 above | $100 for each full $1,000 above |
| Fully phased out (with the maximum deduction) | $275,000 | $550,000 |
The first three rows come from the IRS and Schedule 1-A. The last row is our own arithmetic from the Schedule 1-A formula: $12,500 ÷ $100 × $1,000 = $125,000 above $150,000, and $25,000 ÷ $100 × $1,000 = $250,000 above $300,000.
Worked examples
Example 1: no phase-out. Regular rate $30 an hour, time and a half, 120 overtime hours in the year. The premium per hour is $30 × 0.5 = $15, so qualified overtime is 120 × $15 = $1,800. With MAGI of $80,000 there is no reduction, so the deduction is $1,800.
Example 2: phase-out. Qualified overtime of $12,500 or more (so the $12,500 maximum applies) and MAGI of $200,000, filing as single. $200,000 − $150,000 = $50,000; $50,000 ÷ $1,000 = 50; 50 × $100 = $5,000. The deduction is $12,500 − $5,000 = $7,500.
Other rules from the IRS
- You must have a valid Social Security number (for employment) and include it on your return.
- If you are married, you and your spouse must file a joint return to claim the deduction.
- The deduction is available whether you itemize or take the standard deduction.
- For tax year 2025, employers and other payers were not required to report qualified overtime separately on Forms W-2, 1099-NEC and 1099-MISC. For 2026 and later years, they are required to report it separately; the IRS describes Form W-2 box 12 code “TT” (IRS questions and answers, FS-2026-13).
- How to work out MAGI for this deduction (see IRS Notice 2025-69 and the Schedule 1-A instructions).
- Whether your job is covered by and not exempt from FLSA overtime. That depends on your duties and pay, and federal employees have special rules.
- State income tax, Social Security and Medicare tax, and your actual tax bracket.
- Self-employed or 1099 reporting details, and the exact line-by-line reporting on your return.
- Which tax years the deduction applies to. We did not verify an end date, so check the IRS pages below.
Where do I find my overtime hours?
Use your pay stubs, or add up the hours over 40 in each workweek with the overtime calculator or the time card calculator.
Frequently asked questions
What is the no tax on overtime deduction?
It is a federal income tax deduction for qualified overtime compensation, added by the One, Big, Beautiful Bill Act (P.L. 119-21). The IRS says that if you receive qualified overtime compensation, you may deduct the pay that exceeds your regular rate of pay.
Does the deduction cover all of my overtime pay?
No. Qualified overtime compensation is only the part above your regular rate that the Fair Labor Standards Act requires. If you are paid time and a half, the “half” is qualified. If your employer pays double time, only the one-half portion needed to meet the FLSA requirement counts (IRS questions and answers).
What is the maximum deduction?
$12,500 per year, or $25,000 for married couples filing jointly. It is reduced when modified adjusted gross income (MAGI) is above $150,000 ($300,000 if filing jointly).
How does the income phase-out work?
On the 2025 Schedule 1-A, you take MAGI minus $150,000 ($300,000 joint), divide by $1,000 and round down to a whole number, multiply by $100, and subtract that from your deduction (not below zero). With the full maximum, that reaches zero at $275,000 ($550,000 joint).
Do I need to itemize?
No. The IRS says the deduction is available whether you itemize or take the standard deduction.
What else is required?
You need a valid Social Security number, and if you are married you must file a joint return to claim the deduction (IRS).
Is state income tax covered?
No. This page only covers the federal deduction as described by the IRS. We have not checked how any state treats overtime.
Sources
- Internal Revenue Service. What to know about the No Tax on Overtime deduction (page last reviewed September 10, 2026). https://www.irs.gov/newsroom/what-to-know-about-the-no-tax-on-overtime-deduction
- Internal Revenue Service. Questions and answers about the new deduction for qualified overtime compensation (FS-2026-01; superseded by FS-2026-13). https://www.irs.gov/newsroom/questions-and-answers-about-the-new-deduction-for-qualified-overtime-compensation
- Internal Revenue Service. Updates to questions and answers about the new deduction for qualified overtime compensation (FS-2026-13). https://www.irs.gov/pub/taxpros/fs-2026-13.pdf
- Internal Revenue Service. 2025 Schedule 1-A (Form 1040), Part III, No Tax on Overtime. https://www.irs.gov/pub/irs-pdf/f1040s1a.pdf
Last checked: October 9, 2026. We only cite pages we have opened. If you spot a mistake, email info@timecardcalc.app.