United States · Federal·Tax year 2026·Figures in USD, rules as published by IRS
Overtime Tax Deduction Calculator (2026)
Overtime is not tax-free in 2026. What changed is that you can now deduct the premium portion of your overtime pay — the extra half of time-and-a-half — up to $12,500 ($25,000 if you file jointly). This calculator works out your deductible amount and roughly what it saves you.
Your details
$
Paid at time-and-a-half
$
Including overtime. Sets your bracket and the phase-out.
Enter your hourly rate and overtime hours. Your result appears here as you type — there is no button to press.
Calculating
Deductible overtime premium$0of $0 total overtime pay
Estimated tax saving$0
Marginal rate0%
How your overtime pay splits0% qualifies
Premium half — qualifies $0Regular base — taxable $0
The mistake almost everyone makes
Only the premium half of time-and-a-half is deductible — not the whole overtime payment.
If you earn $30.00 an hour and work one overtime hour, you are paid $45.00. The deduction covers the extra $15.00 only. The first $30.00 is your regular rate and stays fully taxable.
Paid for the hour$45.00
Regular rate — taxable$30.00
Premium — deductible$15.00
Show the mathsSee how this was worked outHide
Marginal rates use the 2026 federal brackets and the standard deduction for your filing status. State taxes, payroll taxes and credits are not included.
Updated ·Source: IRS·Runs entirely in your browser — nothing is uploaded
The deduction is federal. Most states have not conformed to it, so state tax usually still applies to the full overtime amount — including the premium half.
Coming soonSee all 50 statesWe are compiling how each state treats this deduction from official sources. Until then, check with your state's revenue department.
What if I work double-time?
Double-time does not double your deduction. You are paid $30.00 extra on top of a $30.00 regular rate, but only one-half of that extra amount — $15.00 an hour — counts as qualified overtime. It is the same $15.00 whether you are paid time-and-a-half or double-time.
Paid for the hour$60.00
Taxable portion$45.00
Qualified premium — deductible$15.00
The rules, in plain English
Is overtime tax-free in 2026?
No. It is a deduction against federal income tax on the premium portion only. Social Security and Medicare still apply, and most states have not conformed, so state tax usually still applies to the full amount.
How much of my overtime is deductible?
Take half of your regular hourly rate — the premium — and multiply it by your qualifying overtime hours. Then apply the annual cap ($12,500 single, $25,000 joint) and, if your income is high, the phase-out. At $30.00 an hour and 120 overtime hours the premium is $1,800, all of which is deductible because it is under the cap.
Who qualifies for the overtime deduction
Employees covered by, and not exempt from, FLSA overtime rules
Overtime paid for hours over 40 in a workweek. Contractual overtime your employer pays voluntarily does not count
A valid Social Security number is required; if married you must file jointly
Independent contractors and self-employed workers do not qualify — FLSA overtime applies to employees only
From tax year 2026 the amount appears on W-2, box 12, code TT
The income phase-out explained
Cap — single$12,500phase-out from $150,000 MAGI
Cap — joint$25,000phase-out from $300,000 MAGI
Above $150,000 of modified adjusted gross income ($300,000 joint) the deduction falls by $100 for every $1,000 of income and cannot go below zero. It is fully gone at $275,000 single or $550,000 joint.
How to claim it on Schedule 1-A
Claim it on Schedule 1-A (Form 1040) when you file.
You do not need to itemise — it is claimable alongside the standard deduction.
From tax year 2026 your employer reports it separately on W-2, box 12, code TT. Check it matches your own figure.
Withholding continues as normal, so the benefit usually arrives as a larger refund rather than a bigger paycheck.
Overtime deduction FAQ
Is my overtime now tax-free?
No. It is a deduction against federal income tax on the premium portion only. Social Security and Medicare still apply, and state tax usually still applies to the full amount.
Will I see it in my paycheck?
No. Withholding continues as normal; you claim the deduction on Schedule 1-A when you file, so it usually shows up as a larger refund.
What if my W-2 looks wrong?
Ask your employer for a corrected Form W-2c. Form 4852 does not satisfy the separate reporting requirement.
How accurate is this estimate?
The deductible amount follows the statutory rules. The tax saving is approximate: it applies your marginal rate and ignores state tax, credits and other adjustments.
