No tax on overtime

The overtime deduction you can claim, from your own pay and income.

Example values, change them. The answer updates as you type.

Tax year

Your overtime

Overtime pay

Filing status

Modified AGI

$3,000.00Full breakdown below Add your box 12 amount to see your deduction.Box 12 amount can't be negative. Enter your box 12 amount in dollars.Box 12 amount can't be more than 100,000,000 dollars.Box 12 amount can only go to cents: 2 decimal places.Box 12 amount must be a number.Add your modified AGI to see your deduction.Modified AGI can't be negative. Enter your modified AGI in dollars.Modified AGI can't be more than 100,000,000 dollars.Modified AGI can only go to cents: 2 decimal places.Modified AGI must be a number.Add your box 12 amount and modified AGI to see your deduction.Add your overtime pay to see your deduction.Overtime pay can't be negative. Enter your overtime pay in dollars.Overtime pay can't be more than 100,000,000 dollars.Overtime pay can only go to cents: 2 decimal places.Overtime pay must be a number.Add your overtime pay and modified AGI to see your deduction.Add your overtime hours to see your deduction.Overtime hours can't be negative. Enter your overtime hours in hours.Overtime hours can only go to 2 decimal places.Overtime hours must be a number.Add your regular rate to see your deduction.Regular rate can't be 0. Enter your regular rate in dollars.Regular rate can't be negative. Enter your regular rate in dollars.Regular rate can't be more than 1,000 dollars.Regular rate can only go to cents: 2 decimal places.Regular rate must be a number.Add your overtime hours, regular rate and modified AGI to see your deduction.Married people must file jointly to claim this deduction. $3,000.00 Full breakdown below

Your deduction

$3,000.00

Deducted from your 2026 taxable income on Schedule 1-A. Not tax-free pay: it lowers the income your tax is worked out on.

$3,000.00 Qualified overtime

$12,500.00 Cap

$0.00 Phase-out cut

Checked Oct 16, 2026 by JunaydMethod and sources

Your $3,000.00 of qualified overtime

Deduction $3,000.00

For 2026, only the amount your W-2 shows in box 12, code TT counts. Until it arrives, one third of your time-and-a-half pay is an estimate.

How does no tax on overtime work?

No tax on overtime is a deduction for tax years 2025 through 2028. You deduct the extra half of time and a half the FLSA requires, up to $12,500 ($25,000 joint). It shrinks above $150,000 of modified AGI ($300,000 joint), and employment taxes still apply.

How we worked it out

$9,000.00 overtime pay ÷ 3 = $3,000.00 qualified overtime (the extra half you were paid)
The smaller of $3,000.00 and the $12,500.00 cap = $3,000.00
Your income of $62,000.00 is not over $150,000.00, so there is no phase-out cut
$3,000.00 − $0.00 = $3,000.00 deduction

Only the extra half counts

Qualified overtime is the extra half of time and a half that the FLSA requires for hours over 40 in a workweek. Overtime paid only because of a state law or a union contract doesn't count. On $9,000 of time-and-a-half pay, the extra half is $3,000.00.

For 2025, if your pay stubs show only a combined amount, the IRS lets you use one third of it. From 2026, your W-2 shows the amount in box 12 with code TT, and only that amount counts.

The income phase-out

Above $150,000 of modified AGI ($300,000 joint), the deduction drops by $100 for each full $1,000 over. A single filer with $175,000 of modified AGI and $3,000.00 of qualified overtime deducts $500.00.

Worked examples

$9,000 of time-and-a-half pay on 2026 pay stubs

Tax year 2026Your overtime Pay stubBox 12 amount $3,000Overtime pay $9,000Overtime hours 300 hRegular rate $20Filing status Single or head of householdModified AGI $62,000

You can deduct $3,000.00 of qualified overtime from your 2026 taxable income.

Your deduction: $3,000.00
Qualified overtime: $3,000.00
Cap: $12,500.00
Phase-out cut: $0.00

A joint return with $25,000 in box 12

Tax year 2026Your overtime W-2Box 12 amount $25,000Overtime pay $9,000Overtime hours 300 hRegular rate $20Filing status Married filing jointlyModified AGI $355,000

You can deduct $19,500.00 of qualified overtime from your 2026 taxable income.

Your deduction: $19,500.00
Qualified overtime: $25,000.00
Cap: $25,000.00
Phase-out cut: $5,500.00

A single filer above the phase-out

Tax year 2026Your overtime Pay stubBox 12 amount $3,000Overtime pay $9,000Overtime hours 300 hRegular rate $20Filing status Single or head of householdModified AGI $175,000

You can deduct $500.00 of qualified overtime from your 2026 taxable income.

Your deduction: $500.00
Qualified overtime: $3,000.00
Cap: $12,500.00
Phase-out cut: $2,500.00

Common questions

When does no tax on overtime start?

It applies to tax years 2025 through 2028, so overtime earned in 2025 counts on the return you file in 2026.

Is overtime taxed?

Yes: overtime is still taxable income and still has employment taxes taken out. For 2025 to 2028, you can deduct the qualified extra half, up to $12,500 ($25,000 joint), on Schedule 1-A.

How do I calculate the no tax on overtime deduction?

Take the extra half of your time-and-a-half pay and cap it at $12,500 ($25,000 joint). Then subtract $100 for each full $1,000 of modified AGI over $150,000 ($300,000 joint).

Is no tax on tips in effect?

Yes, for 2025 through 2028: a separate deduction of up to $25,000 for tips in jobs on the Treasury's list, with the same income limits. This page covers overtime only.

How much overtime did you earn?

Work out a week's pay with overtime under the federal rule or your state's.

Work out your overtime pay

More pay and hours calculators

Method and sources

Each calculator applies the published federal or state rule to the hours and pay you enter and rounds each amount to the nearest cent. Every step is shown, and every rule links to its official page with the date we checked it. Not legal or tax advice; the pages never decide whether you're exempt. Spot something wrong? Tell us and we will fix it and note the change.

An estimate of the deduction, not a tax return.
You have a valid Social Security number and, if married, file jointly.
Only overtime the FLSA requires counts; overtime paid only under a state law or a contract doesn't.
Each amount is rounded to the cent; half a cent rounds up.

IRS: What to know about the no tax on overtime deduction Checked Oct 16, 2026
IRS: Schedule 1-A (Form 1040) 2025 Checked Oct 16, 2026
IRS: FS-2026-13, FAQs on qualified overtime compensation Checked Oct 16, 2026
IRS: Notice 2025-69 Checked Oct 15, 2026
IRS: 2026 General Instructions for Forms W-2 and W-3 Checked Oct 15, 2026
U.S. Department of Labor: Fact Sheet #23, Overtime Pay Requirements of the FLSA Checked Oct 16, 2026
IRS news release IR-2025-114 Checked Oct 16, 2026