No Tax on Overtime Calculator 2026: Estimate Your Savings

This free calculator estimates your federal “no tax on overtime” deduction under the One Big Beautiful Bill Act (OBBBA), including the FLSA premium-only rule, the income phase-out, and your filing-status cap. Enter your W-2 amount or estimate it from your pay. No sign-up required.

✔️ Based on IRC §225 / Schedule 1-A rules ✔️ Checked against IRS FS-2026-13 ✔️ Educational estimate only

Last verified: . Federal rules checked against IRS Fact Sheet FS-2026-13 (issued August 6, 2026).

This is enacted law, not a proposal. The qualified overtime compensation deduction was signed into law on July 4, 2025 as part of the OBBBA and applies from tax year 2025 through 2028. It is a federal income tax deduction on the overtime premium, not a blanket tax exemption on overtime pay. Starting with tax year 2026, employers report the qualifying amount in Box 12, code TT of your W-2.

Is overtime really tax-free in 2026?

No. Under the OBBBA, eligible workers can deduct their qualified overtime premium (the extra half of time-and-a-half pay, not the full overtime paycheck) from federal taxable income, up to $12,500 (single) or $25,000 (joint) per year, phasing out above $150,000 / $300,000 MAGI. Social Security, Medicare, and most state income taxes still apply. For 2026 returns, the amount to use is the one in W-2 Box 12, code TT. The calculator below shows your numbers.

“No tax on overtime” is one of the most misread tax changes of 2026. It does not make overtime pay tax-free. It gives eligible workers a temporary federal income tax deduction for the overtime premium, capped by filing status and reduced for higher earners.

This calculator runs the actual statutory math. It isolates the deductible premium from your total overtime pay, applies the $12,500 or $25,000 cap, checks the MAGI phase-out, and shows what you still owe regardless: Social Security and Medicare tax, and in most states, state income tax. It is built for hourly workers who regularly log more than 40 hours a week, and for anyone checking whether a paycheck or a W-2 looks right.

You can enter your overtime two ways. If you already know your qualified overtime amount, for example from Box 12, code TT of a Form W-2, type it in directly. If you don’t, estimate it from your regular hourly rate, weekly overtime hours, and weeks worked. Employers furnish 2026 W-2s in early 2027, so most people using this page today will want the estimate.

The estimate only works if your overtime hours are required by the federal Fair Labor Standards Act (FLSA), which generally means hours over 40 in a workweek. Overtime required only by a state’s daily overtime rule, a union contract, or an employer’s own policy does not count. The calculator asks about this before it shows a result.

Next, set your filing status and MAGI. The deduction starts to phase out above $150,000 (single) or $300,000 (joint), and married people who file separately cannot claim it at all. Then choose whether your state taxes wages. State treatment varies, so state savings are shown separately and only if you confirm your state allows the deduction.

Every rule the calculator uses is explained in the Methodology section below, and the Sources section links to the IRS guidance behind it.

How to Use the No Tax on Overtime Calculator

1

Pick your input

Enter the W-2 Box 12, code TT amount, or estimate it from your hourly pay and overtime hours.

2

Confirm FLSA overtime

Only overtime required by the federal FLSA counts toward the deduction.

3

Set filing status and MAGI

This sets your cap and checks the phase-out.

4

Review your savings

See the allowable deduction and estimated federal savings, with state savings shown separately.

Presets are illustrative starting points, not typical pay. Police, fire, and some driver jobs follow special FLSA overtime rules, so those presets start on “Not sure” below.

$
Use your FLSA regular rate. It can be higher than base pay if you earn shift differentials or non-discretionary bonuses.
Count only hours required by the FLSA, generally hours over 40 in a workweek.
Only overtime required by section 7 of the FLSA is qualified overtime under IRC §225.
Only the FLSA-required 0.5× premium is deductible. Anything your employer pays above 1.5× is real income, but it doesn’t qualify for this deduction.
$
For 2026 returns, use the amount shown on your Form W-2. If you file jointly and both spouses have a code TT amount, add them together. Enter the full amount even if it is above the cap. The calculator applies the cap for you.
This calculator applies one flat bracket for simplicity. Your actual savings depend on your full return.
$
Enter the MAGI for your tax return. For a joint return, use the joint MAGI. The phase-out starts above $150,000 (single) or $300,000 (joint).
Enter your marginal state income tax rate. This is a planning estimate, not a state tax calculation.

Results update automatically as you change any value, and the page scrolls to them when you pause.

Results

⚠️ Married Filing Separately is not eligible for this deduction under the statute, regardless of income. The figures below show $0 federal savings for this filing status.
Estimated Federal Tax Savings
$1,430
Approximate value of the deduction at your selected tax bracket. State savings are shown separately below.
Qualified Overtime$6,500
Allowable Deduction$6,500
Total Overtime Premium Paid (above straight time)$6,500
FLSA-Qualified Premium (0.5× base rate)$6,500
Deduction Cap (Filing Status)$12,500
Phase-Out Reduction (MAGI)-$0
Allowable Federal Deduction$6,500
Estimated Federal Income-Tax Savings$1,430
Illustrative State Tax Savings$0 (not confirmed)
Estimated FICA on Qualified Overtime (7.65%)$497

Social Security and Medicare still apply. This deduction does not reduce payroll taxes, and the FICA line is not part of your savings.

Note: Your qualified overtime is above the federal deduction cap for your filing status. The deduction is limited to the cap (before any phase-out).
*This tool applies one flat federal bracket and does not account for standard deductions, other credits, or your full tax return. It is not tax advice. See the Methodology and Disclaimer sections below.

How the No Tax on Overtime Deduction Works

The phrase “no tax on overtime” refers to a provision of the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025. It created a temporary federal income tax deduction, codified at IRC §225, for “qualified overtime compensation.” It applies to tax years 2025 through 2028 and, unless Congress extends it, expires after that.

It is a deduction, not an exemption. Overtime pay is still reported as wages, and every dollar of it is still subject to payroll withholding throughout the year. The benefit shows up when you file: you subtract your qualified overtime, up to the cap, from your taxable income. You can claim it whether you itemize or take the standard deduction.

Treasury reported in a July 2, 2026 release that more than 29 million taxpayers claimed the deduction for tax year 2025 through the April 15 filing deadline, with an average deduction above $3,100. At a 22% bracket, a $3,100 deduction is worth about $682 in federal tax, which is why this calculator reports savings as well as the deduction itself.

💡 Only the “premium,” not the paycheck

The deduction covers only the FLSA overtime premium: the extra 0.5× on top of your regular rate that federal law requires for hours over 40 in a week. If your regular rate is $20/hour and you’re paid $30/hour for overtime, only the $10/hour premium is deductible. The other $20/hour was taxed like regular wages, deduction or not.

How Much Overtime Can You Deduct in 2026?

The qualifying amount is your FLSA overtime premium: 0.5 × your regular hourly rate × qualifying overtime hours. That amount is capped by filing status and, for higher earners, reduced by the phase-out described below. Whatever is left is your allowable deduction.

Filing StatusAnnual Deduction CapPhase-Out StartsFully Phased Out At
Single / Head of Household$12,500$150,000 MAGI~$275,000 MAGI
Married Filing Jointly$25,000$300,000 MAGI~$550,000 MAGI
Married Filing Separately$0 (not eligible)n/an/a

The deduction is worth your allowable amount multiplied by your marginal federal tax rate, not the deduction itself. A $4,400 deduction at a 12% bracket saves $528, and at 22% it saves $968.

How the No Tax on Overtime Phase-Out Works

Once MAGI exceeds the threshold, the deduction is reduced by $100 for every $1,000 of MAGI above it. It is not eliminated outright. For a single filer with $190,000 MAGI, the excess over $150,000 is $40,000, so the reduction is ($40,000 ÷ $1,000) × $100 = $4,000. Their allowable deduction is $12,500 − $4,000 = $8,500, assuming their qualified overtime was at least that much.

The Schedule 1-A worksheet drops any partial $1,000. At $150,999 of MAGI the reduction is $0, and at $151,000 it is $100. The reduction is applied after the cap, so a filer with only $3,000 of qualified overtime and a $5,000 reduction ends up with no deduction.

Most hourly overtime workers earn well under $150,000, so the phase-out never applies to them. It mainly affects households with significant other income.

Who Qualifies for the No Tax on Overtime Deduction?

You generally qualify if you are a non-exempt employee who is paid overtime required by the FLSA, you have a Social Security number that is valid for employment, and you file as single, head of household, or married filing jointly. The following people generally cannot claim it:

  • Married Filing Separately filers. They are excluded entirely by statute, at any income level.
  • Salaried, FLSA-exempt employees. The deduction only covers overtime required under the FLSA. If you don’t legally qualify for FLSA overtime, you have no qualified overtime compensation to deduct.
  • Workers whose overtime is required only by state law or a union contract. Only the federally required portion counts, even if your state or contract requires a richer overtime rate.
  • Independent contractors and the self-employed. The deduction is built around FLSA employees. The IRS notes a narrow exception for workers who are employees under the FLSA but are treated as contractors for tax purposes.
  • Very low earners with no federal income tax. The deduction reduces taxable income, so it has no value if you don’t owe federal income tax in the first place.

What Counts as Qualified Overtime?

Qualified overtime compensation is overtime pay required under section 7 of the FLSA that exceeds your regular rate. For a worker paid time and a half, that is the extra half. Your regular rate is not always your base wage. Under the FLSA it can include shift differentials and non-discretionary bonuses, so if your pay stub shows a higher blended rate, use that figure in the calculator.

These do not count: hours over 8 in a day that are required only by state law, overtime required only by a collective bargaining agreement, voluntary premiums your employer chooses to pay, and the part of double time or holiday pay above the half-time premium.

Some occupations follow special FLSA overtime rules. Police and fire employees can fall under a partial exemption with higher overtime thresholds, and some drivers are exempt from FLSA overtime under the Motor Carrier Act. If your job is in one of these groups, only the hours the FLSA actually requires at overtime rates count. Your W-2 Box 12, code TT amount already reflects your employer’s determination.

What Is W-2 Box 12 Code TT?

Code TT is the W-2 code employers use, starting with tax year 2026, to report your total qualified overtime compensation. It sits in Box 12 of Form W-2, and the first forms carrying it are the 2026 W-2s furnished in early 2027. The amount is already included in your Box 1 wages. The code identifies how much of it may be deductible.

The figure is the FLSA premium only. For someone with a $20 base rate paid $30 for overtime, code TT reports $10 per overtime hour, not $30. Employers report the full amount even if it is more than you can deduct. The IRS gives the example of an employer that paid $30,000 of qualified overtime: the W-2 shows $30,000, even though the most a single filer can deduct is $12,500 and a joint filer $25,000.

For tax years after 2025, the code TT amount is effectively your ceiling. The IRS guidance says employees generally cannot use their own records if the employer leaves the amount off or understates it. In that case you need a corrected Form W-2c. In rare cases where a worker is an employee under the FLSA but treated as a contractor for tax purposes, the payer reports the amount on Form 1099-NEC (box 1d) or Form 1099-MISC (box 14) instead.

How to Claim the No Tax on Overtime Deduction on Schedule 1-A

You claim the qualified overtime deduction on Schedule 1-A, filed with your Form 1040. For tax year 2025, the IRS gave employers transition relief and did not require them to report qualified overtime separately, so many workers estimated the amount from pay stubs or a year-end payroll statement under IRS Notice 2025-69.

For tax year 2026 and later, employers must report it separately. On a 2026 return, your W-2 Box 12, code TT amount is the starting point, and it is the number to enter in the W-2 mode of the calculator above. If you think your employer omitted or understated it, ask for a corrected Form W-2c instead of assuming an amount.

What Still Gets Taxed

⚠️ Payroll taxes are unaffected

Social Security (6.2%) and Medicare (1.45%), 7.65% combined, are still withheld from every dollar of overtime pay, deduction or not. Your employer still pays its matching share. This deduction only changes what you owe in federal income tax when you file.

The straight-time portion of your overtime hours is taxed exactly like regular wages. Only the premium half is deductible, and only up to the cap.

Does Your State Tax Overtime Too?

Nine states have no tax on wage income at all, so overtime pay is already untaxed there regardless of federal rules: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Everywhere else, whether the federal deduction also lowers your state tax bill depends on your state’s law. Most states start from federal adjusted gross income (AGI), a figure calculated above where this deduction applies on the federal return. So the deduction does not flow through automatically. A state has to adopt it, or its own version of it, before residents get the benefit.

The picture is uneven and still changing. PBS News reported in April 2026 that Idaho, Iowa, Montana, North Dakota, and Oregon allow the overtime deduction on state returns, that Colorado opted out of it for overtime, and that Arizona listed it on state forms under a governor’s executive order. Other states have created smaller deductions of their own, and many did not conform.

Because this changes with each legislative session, the calculator does not guess for you. State savings appear only if your state taxes wages and you confirm that it allows the deduction, and the figure is an illustration (allowable deduction × the rate you enter), not a state tax calculation. Check your state revenue department before relying on it.

Worked Examples

Estimate from pay. A single warehouse worker earning $22/hour, working 8 overtime hours/week at the standard 1.5× rate, 50 weeks/year, MAGI $58,000, 12% federal bracket, no state income tax:

  • FLSA-qualified premium: $22 × 0.5 × 8 × 50 = $4,400
  • Deduction cap (single): $12,500. The premium is under the cap, so nothing is lost to it.
  • MAGI is under $150,000, so no phase-out reduction applies.
  • Allowable federal deduction: $4,400
  • Estimated federal tax savings at 12%: $4,400 × 12% = $528
  • FICA on the $4,400 premium (7.65%): $336.60, unaffected by this deduction

Enter the W-2 amount. A married couple filing jointly has $31,000 of combined Box 12, code TT amounts, MAGI $120,000, and a 22% bracket:

  • Qualified overtime from the W-2s: $31,000
  • Deduction cap (joint): $25,000, so $6,000 is not deductible
  • MAGI is under $300,000, so no phase-out reduction applies.
  • Allowable federal deduction: $25,000
  • Estimated federal tax savings at 22%: $25,000 × 22% = $5,500

Frequently Asked Questions: No Tax on Overtime Calculator

Is overtime pay really tax-free in 2026?
No. “No tax on overtime” is a federal income tax deduction, not a tax exemption. Eligible workers can deduct their qualified overtime premium, up to $12,500 (single) or $25,000 (joint), from federal taxable income for tax years 2025 through 2028. Payroll taxes (Social Security and Medicare) still apply, and most states still tax overtime in full.
Is this deduction a proposal or is it actually law?
It is current law. The qualified overtime compensation deduction was enacted as part of the One Big Beautiful Bill Act (OBBBA), signed on July 4, 2025, and applies to tax years 2025 through 2028.
How much of my overtime pay can I actually deduct?
Only the FLSA overtime premium, which is the extra half of time-and-a-half pay, not your full overtime earnings. If your regular rate is $20/hour and you’re paid $30/hour for overtime, only the $10/hour premium counts toward the deduction. That amount is capped at $12,500 (single) or $25,000 (joint) per year before any phase-out.
Do all of my overtime hours count?
No. Only overtime required by section 7 of the federal Fair Labor Standards Act counts, which generally means hours over 40 in a workweek paid at time and a half. Overtime required only by a state’s daily overtime rule, a union contract, or an employer’s own policy is not eligible, and neither is the part of double time or holiday pay above the half-time premium. Salaried employees who are exempt from FLSA overtime have no qualified overtime to deduct.
What is the income phase-out for the overtime deduction?
The deduction phases out once modified adjusted gross income (MAGI) exceeds $150,000 for single filers or $300,000 for joint filers. It is reduced by $100 for every $1,000 of MAGI above the threshold, which brings a full $12,500 deduction to $0 at about $275,000 of MAGI for single filers and a full $25,000 deduction to $0 at about $550,000 for joint filers.
Can married couples filing separately claim the overtime deduction?
No. The statute excludes taxpayers who use Married Filing Separately status, with no exception, regardless of income. Married taxpayers must file a joint return to claim the deduction.
Do I still pay Social Security and Medicare tax on overtime?
Yes. The deduction only applies to federal income tax. FICA payroll taxes (6.2% Social Security and 1.45% Medicare) are withheld from overtime pay exactly as before, and your employer still pays a matching share.
Does my state also exempt overtime from tax?
Usually not. Nine states have no tax on wage income at all (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming), so overtime is already untaxed there. In other states, the federal deduction only lowers your state tax if your state has adopted it. A handful of states, including Idaho, Iowa, Montana, North Dakota, and Oregon, were reported in spring 2026 to carry the deduction through, while most did not. Check your state revenue department before assuming a state benefit.
What is W-2 Box 12 code TT?
Box 12, code TT is where your employer reports your total qualified overtime compensation on Form W-2, starting with tax year 2026. It is the FLSA overtime premium only, not your full overtime pay, and it can be larger than the amount you are allowed to deduct because the cap and phase-out apply on your return. For 2026 returns, this is the figure to use.
Can I use my own pay records to claim the deduction in 2026?
For tax year 2025, yes. Employers were not required to break out overtime, so IRS Notice 2025-69 let workers work out the amount from their own pay records. For tax years after 2025, the rules are stricter: you generally cannot deduct more than the amount reported in Box 12, code TT. If it is missing or too low, IRS guidance says to ask your employer for a corrected Form W-2c.
Do I have to itemize to claim the overtime deduction?
No. The deduction is available whether you itemize or take the standard deduction. It is claimed on Schedule 1-A and reduces taxable income, but it does not reduce the MAGI used for the phase-out.
How do I actually claim the deduction on my tax return?
You claim it on Schedule 1-A, filed with Form 1040. For tax year 2025, employers were not required to report qualified overtime separately, so many workers estimated the amount from pay stubs. Starting with tax year 2026, employers must report it in Box 12 of Form W-2 using code TT, so your W-2 is the place to start.

Methodology: How This Calculator Works

The calculator has two input modes. In the W-2 mode, the qualified overtime amount is the figure you enter from Form W-2, Box 12, code TT. In the estimate mode, it is calculated as 0.5 × your entered regular hourly rate × weekly overtime hours × weeks worked per year. The 0.5× multiplier is fixed because only the statutory FLSA premium is deductible under IRC §225, regardless of what overtime multiplier you select. The multiplier you choose is used only to show the total overtime premium paid, for comparison.

In the estimate mode, the calculator asks whether your hours are required by the FLSA. If you answer “No,” qualified overtime is set to $0. If you answer “Not sure,” the figures assume the hours qualify and a notice explains that the estimate cannot be confirmed from the inputs alone.

The qualifying amount is capped at $12,500 for Single/Head of Household or $25,000 for Married Filing Jointly, and set to $0 for Married Filing Separately regardless of any other input.

If MAGI exceeds $150,000 (single) or $300,000 (joint), the capped amount is reduced by $100 for every full $1,000 of MAGI above the threshold, never below zero. Partial thousands are dropped, following the Schedule 1-A worksheet.

Federal tax savings are estimated by multiplying the allowable deduction by a single selected federal bracket. This is a simplification and does not model your full progressive tax return, standard deduction, or other credits.

State savings are illustrative. They are calculated only if you select a state that taxes wages and check the box confirming the state allows the deduction, and they equal the allowable deduction times the state rate you enter. Otherwise the calculator shows $0 for state savings, because assuming conformity that doesn’t exist would overstate your savings. State savings are not included in the headline figure.

FICA is shown as a fixed 7.65% of your qualified overtime, for context. It isn’t affected by this deduction and is not part of the savings figure.

This calculator does not model: the tax year 2025 own-records method under IRS Notice 2025-69, self-employment tax treatment, the separate “No Tax on Tips” deduction, other adjustments that affect MAGI (such as excluded foreign income), or state legislation passed after publication. All figures reflect enacted federal law (OBBBA, IRC §225) and IRS guidance published through September 19, 2026, and are estimates for planning purposes only.

Related Tools

Disclaimer This is an independent, unofficial estimation tool built and maintained by Ultimate Info Guide. It is not produced or endorsed by the IRS, the U.S. Treasury, or any government agency, and it is not tax, legal, or financial advice. Figures reflect the qualified overtime compensation deduction (IRC §225) enacted under the One Big Beautiful Bill Act, signed July 4, 2025, covering tax years 2025 through 2028, as understood from IRS guidance current through September 19, 2026 (Fact Sheet FS-2026-13). IRS guidance, forms, and state conformity continue to evolve. Always confirm your exact eligibility, qualifying amount, and state treatment with a licensed tax professional or the IRS before filing.

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