No tax on overtime calculator
Turn the number in box 12 of your W-2 into a deduction and an estimate of the federal tax it saves.
Enter your numbers to see the deduction, each step, and the estimated tax saved.
Estimate only, not tax advice. Your return is decided by the IRS forms and instructions, and a tax professional can check your numbers.
What the deduction covers
The deduction is for “qualified overtime compensation”: the pay your employer owes you under the Fair Labor Standards Act for hours over 40 in a week, above your regular rate. On time-and-a-half, that is the extra half. If you earn $30 an hour and work 10 overtime hours, you are paid $450 for those hours and only $150 of it qualifies.
It is a deduction, not an exemption. It lowers your taxable income on Form 1040 through Schedule 1-A. It does not remove Social Security and Medicare tax from your paycheck, and it does not change what your employer withholds unless you update your Form W-4.
You have a W-2 with a number in box 12. Now what?
- Find box 12 on your 2026 W-2 and look for code TT. That amount is your qualified overtime for the year. See what code TT means.
- Enter it above with your filing status and MAGI.
- Your preparer or tax software carries the result to Schedule 1-A (Form 1040). The box 12 amount can be larger than what you can deduct; the cap and phase-out are applied on that schedule.
Working from hours instead? Use “Estimate from hours”, or keep a week-by-week record with the overtime worksheet.
The limits in one place
| Rule | Single, head of household | Married filing jointly |
|---|---|---|
| Maximum deduction | $12,500 | $25,000 |
| Phase-out starts above MAGI of | $150,000 | $300,000 |
| Reduction | $100 for each full $1,000 above the start | |
| Tax years | 2025 to 2028 | |
Sources
- Schedule 1-A (Form 1040), 2025
- IRS: What to know about the No Tax on Overtime deduction
- IRS FS-2026-13: Questions and answers about the qualified overtime compensation deduction
- IRS Notice 2025-69: Guidance for taxpayers who received qualified tips or qualified overtime compensation
- IRS Rev. Proc. 2025-32 (2026 tax brackets and standard deduction)
Last checked . Figures follow the IRS pages above; the law can change, so confirm on irs.gov before you file. This site gives estimates, not tax advice.
Questions
Is overtime really tax free now?
Not entirely. For tax years 2025 through 2028 you can deduct the premium part of qualified overtime, up to $12,500 ($25,000 on a joint return). Social Security and Medicare tax still apply, and your state may still tax it.
Do I have to itemize to get the deduction?
No. The IRS says the deduction is available whether you itemize or take the standard deduction.
Why is my deduction smaller than my overtime pay?
Only the extra half of time-and-a-half counts: the part above your regular rate that the Fair Labor Standards Act (FLSA) requires. The straight-time part of your overtime hours is ordinary wages, and the deduction is capped.
What changes if my income is high?
The deduction shrinks by $100 for every full $1,000 your modified adjusted gross income is above $150,000 ($300,000 on a joint return). This calculator shows that step on its own line.
Can I claim it if I am married filing separately?
No. The IRS says that if you are married, you must file jointly to claim the overtime deduction.
Where do I find the amount to enter?
On a 2026 Form W-2, qualified overtime is in box 12 with code TT. For 2025, employers were not required to report it separately, so use your pay records or ask your employer.