Overtime Tax Deduction Calculator
Only the overtime premium is deductible, not your whole overtime paycheck. Enter your rate and hours to see how the tax on your overtime pay works out for 2026, and where the income limit starts cutting it back.
- · Input is the FLSA-required premium only (the 0.5x half of time-and-a-half) — not total overtime pay. Use the W-2 Box 12 code TT amount when available.
Estimated tax savings (deduction × your marginal rate)
A deduction reduces taxable income — not your tax bill dollar-for-dollar.
The “half portion” rule everyone gets wrong
If you earn $30/hour and work overtime at time-and-a-half ($45/hour), only the $15 premium — the “half” above your regular rate — is deductible, not the full $45. The deduction covers FLSA overtime premium only, capped at $12,500 ($25,000 married filing jointly), phasing out above $150,000 MAGI ($300,000 joint) at $100 per $1,000 of income.
Starting with 2026 W-2s, employers report your qualified overtime premium in Box 12 with code TT — use that number for an exact figure. You claim the deduction on Schedule 1-A whether or not you itemize.
Available 2025–2028. Not available for married filing separately; SSN required. Estimates only — not tax advice.
Extra pay that isn't FLSA overtime
The second misunderstanding, after the half-portion rule, is which extra pay counts. The deduction tracks the premium the Fair Labor Standards Act requires — time-and-a-half for hours worked beyond 40 in a workweek. Premium pay you receive for any other reason sits outside that federal requirement and may not qualify:
- Daily overtime under state law. Some states require a premium past eight hours in a day even when the week never reaches 40. That premium is owed by the state, not by the FLSA.
- Contract or union overtime below 40 hours. If your agreement pays a premium after 37.5 hours, the hours between 37.5 and 40 are premium by contract rather than by federal law.
- Weekend, holiday, and shift differentials. These pay you more for when you worked, not for working longer, so they are not overtime premium at all.
- Double time. Where the FLSA only requires one-and-a-half, the federally required piece is still the half — the rest is your employer paying above the floor.
- “Overtime” paid to exempt salaried staff. If the role is exempt, the FLSA requires no premium for the hours, so a company policy that pays one is going beyond the law.
This is the reason not to rebuild the figure from your pay stubs. Your employer decides which of your premium dollars are FLSA-qualified and reports that total in Box 12, code TT — and that is the number the IRS sees on its copy of your W-2.
How much overtime it actually takes to hit the cap
At a $30 regular rate, each overtime hour produces $15 of deductible premium, so the $12,500 ceiling arrives at roughly 833 overtime hours — about 16 extra hours every week of the year. At $50 an hour the premium is $25 and the cap lands at 500 hours; at $20 it takes 1,250. Very few people reach it.
Which means the cap is rarely what limits this deduction — the income phase-out usually is. Overtime is counted in the MAGI that the phase-out measures, so a heavy overtime year can be what pushes you past $150,000 and starts eroding the deduction that same overtime created.
2026 new deductions at a glance
Four separate rules, four separate caps — you can claim more than one in the same year. The income lines are MAGI, and each one phases out at its own speed.
| Deduction | Cap | MAGI phase-out | Tax years | With standard deduction? |
|---|---|---|---|---|
| Car loan interest | $10,000 of interestSame cap whether you file single or joint | $100,000 → $150,000$200,000 → $250,000 joint−$200 per $1,000 of MAGI over the line | 2025–2028 | Yes — Schedule 1-A |
| Overtime premiumYou are here | $12,500 / $25,000 jointPremium half only, not total overtime pay | $150,000 → $275,000$300,000 → $550,000 joint−$100 per $1,000 of MAGI over the line | 2025–2028 | Yes — Schedule 1-A |
| Senior (65+) | $6,000 per person$12,000 if both spouses are 65+ | $75,000 → $175,000$150,000 → $350,000 joint−6% of MAGI over the line — the steepest of the three | 2025–2028 | Yes — Schedule 1-A |
| HSA & FSA limits | HSA $4,400 / $8,750Health FSA $3,400 · Dependent Care FSA $7,500 | No income phase-outLowers MAGI for the three abovePayroll contributions also skip FICA (7.65%) | 2026 figures, reset annually | Pre-tax payroll — separate track |
The three Schedule 1-A deductions are unavailable to married filing separately and require a valid Social Security number. Because HSA and FSA contributions come out of wages before AGI, they lower the MAGI the other three are measured against — near a threshold, a pre-tax dollar is worth more than its face value.
What to check next
Overtime moves two numbers at once: the deduction you just calculated, and the gross income everything else on your return is measured against. The second one is usually the one worth checking.
- Overtime is taxed and FICA'd on the way in before any of it is deducted on the way out, so the deduction alone doesn't tell you what a heavy year leaves you. The take-home breakdown shows the base your overtime stacks on top of, with the full $40k–$300k table one click further. See take-home at $90,000 →
- Past $150,000 of MAGI this deduction falls $100 for every extra $1,000 — and a big overtime year is exactly what carries a $130k earner over that line. Payroll HSA and FSA contributions come out of wages before AGI, so they hold the deduction up and cut FICA at the same time. See what pre-tax contributions save →
- If you financed a new vehicle in the same year, that interest runs on the same Schedule 1-A under its own $10,000 cap — with a lower income line at $100,000. Worth confirming before you assume a high-overtime year phased you out of everything. Check your VIN and interest cap →
Frequently asked questions
How do I deduct overtime on my taxes?
You claim it on Schedule 1-A, which works alongside the standard deduction, so you do not have to itemize. The figure you enter is the qualified overtime premium your employer reports on your W-2, not your total overtime pay.
How do I calculate the tax on my overtime pay?
Your overtime is taxed as ordinary wages on the way in. What comes back out is the premium portion only: if you earn $30 an hour and overtime pays time-and-a-half at $45, just the $15 premium above your regular rate is deductible. The base $30 is taxed normally.
Is all of my overtime pay tax free?
No, only the premium portion. The rest of your overtime pay is taxed like any other wages, and FICA applies to the premium as well.
What is the overtime tax deduction limit?
Up to $12,500 of qualified overtime premium ($25,000 on a joint return), for tax years 2025 through 2028.
What is the income limit for the overtime deduction?
It phases out above $150,000 of modified adjusted gross income ($300,000 on a joint return), falling $100 for every additional $1,000 of income. Overtime itself counts toward that income.
Where is the overtime deduction on my W-2?
Starting with 2026 W-2s, employers report qualified overtime premium in Box 12 with code TT. Use that number rather than recalculating from your pay stubs.
Are there any restrictions?
It is not available if you file married filing separately, and a valid Social Security number is required. Only FLSA-qualifying overtime premium counts, so extra pay under a company policy that goes beyond FLSA requirements may not.
Sources
Last verified: 2026-08-17 · We monitor official sources daily and update rates after human review of the originals.