No Tax on Overtime Calculator

Last updated: November 4, 2026
Sources verified: November 4, 2026
Tax-year scope: 2025–2028. Estimate only; not tax advice.

How to use this tool

Enter your hourly regular rate and FLSA overtime hours above forty in one workweek.
Enter the number of comparable weeks in the year, filing status, and annual MAGI.
Review the weekly premium, annual amount, cap, phase-out reduction, and estimated deduction against your actual tax records.

Formula

Weekly qualified premium = 0.5 × regular hourly rate × FLSA overtime hours. Annual qualified overtime = weekly premium × weeks entered. Cap at $12,500 per return or $25,000 jointly. Subtract $100 for each whole $1,000 of MAGI above $150,000 or $300,000 jointly, flooring the deduction at zero.

Worked examples

Time-card engine illustration: fifty weekly hours

Schedule: 10:00 + 10:00 + 10:00 + 10:00 + 10:00 of net worked time. The engine calculates 50:00 (50.00 hours).

Regular: 40:00 (40.00 h); overtime: 10:00 (10.00 h); double time: 0:00 (0.00 h). At $24.00 per hour, estimated gross pay is $1,320.00.

IRS premium example with an annual projection

A $20 regular rate and 10 qualifying overtime hours produce $100.00 weekly qualified premium. At 52 weeks, annual qualified overtime is $5,200.00, and the capped amount is $5,200.00. For a single filer with $151,000 MAGI, the reduction is $100.00, leaving an estimated deduction of $5,100.00.

Deduction, not exemption

The name “No Tax on Overtime” describes a deduction, not an exemption from tax on all overtime wages. Overtime remains subject to federal income tax withholding, Social Security, and Medicare taxes. The deduction is available whether you itemize or take the standard deduction. You must have a valid Social Security number for employment; married taxpayers must file jointly. This estimate is a deduction amount, not your tax savings or refund, and state income tax treatment varies.

Which overtime premium qualifies?

Only overtime compensation required under FLSA section 7 in excess of the regular rate qualifies. For ordinary time-and-a-half hours over forty in a workweek, that is the additional half-rate portion. State-law-only overtime, union-contract-only overtime, and overtime paid to FLSA-exempt employees do not qualify. If double time is paid, only the one-half portion relied on to satisfy the FLSA requirement counts. Determine qualifying hours separately for each workweek rather than treating a daily California premium as automatically eligible.

Reporting for 2025 and from 2026

For 2025, employers were not required to report qualified overtime separately; use the methods in Notice 2025-69 and the Schedule 1-A instructions where needed. Beginning in 2026, employers must report total qualified overtime compensation on Form W-2, box 12, code TT. Compare an annualized projection with your actual qualified compensation records before filing. This helper repeats one representative week; irregular overtime across the year needs an actual annual reconciliation. This is an estimate, not tax advice.

Frequently asked questions

Is the entire time-and-a-half payment deductible?

No. The qualified portion is the FLSA-required premium above the regular rate. At a $20 regular rate and ten qualifying hours, the half-rate premium is $10 per hour, totaling $100 for that week.

How does phase-out rounding work?

Count whole $1,000 increments of MAGI above the relevant threshold. For a single filer, $150,999 creates no reduction in this model, while $151,000 creates a $100 reduction from the capped amount.

Can California daily overtime qualify below forty weekly hours?

Overtime required only by state law does not qualify. Enter only FLSA overtime hours for this estimate and do not copy the California daily overtime column without checking weekly qualification.