No Tax on Overtime Calculator 2026

What part of your overtime is deductible

Only the premium counts: the part of your overtime pay above your regular rate that federal law (the Fair Labor Standards Act) requires. With the usual time-and-a-half, that is the "half".

200 overtime hours at time-and-a-half ($33.00 an hour)	$6,600 paid
Regular rate part ($22.00 × 200)	Does not qualify
Premium part ($11.00 × 200)	$2,200 qualifies

If you only know your total overtime pay at time-and-a-half, the qualified part is one third of it. That is what the calculator does with that option.

The limits

Maximum deduction	$12,500 a year ($25,000 joint)
Income phase-out starts at	$150,000 ($300,000 joint)
Reduction	$100 per full $1,000 over
Married filing separately	Not allowed
Tax years	2025 to 2028

Two examples

A warehouse worker. Single, $22.00 an hour, 200 overtime hours in 2026 and $52,000 of W-2 wages. The qualified overtime is $2,200, and the deduction lowers the income tax from $4,060 to $3,796: $264 saved.

A nurse. Single, $38.00 an hour, 300 overtime hours and $95,000 of W-2 wages. The qualified overtime is $5,700, and the income tax drops from $12,070 to $10,816: $1,254 saved.

The same deduction saves more at higher income because it comes off the top of your taxable income, in your highest tax bracket.

Who qualifies

Employees who are owed overtime under federal law (non-exempt under the FLSA): generally hourly workers paid time-and-a-half for hours over 40 in a workweek. Many salaried managers and professionals are exempt and do not qualify. The Department of Labor explains who is covered.
Not independent contractors. 1099 work is not covered by the FLSA overtime rule. If you have a W-2 job with overtime and a side gig, the deduction applies to the W-2 overtime only. Our 1099 vs W-2 guide explains the difference.
A valid Social Security number, and a joint return if you are married.

How to claim it

Find your qualified overtime on your 2026 W-2, box 12, code TT.
Enter it on Schedule 1-A, Part III. The schedule applies the maximum and the income phase-out.
The total from Schedule 1-A lowers your taxable income on Form 1040. You can take it with the standard deduction.

If you also get tips, they have their own deduction on the same schedule: see our no tax on tips calculator.

Frequently asked questions

Is all my overtime pay tax-free?

No. Only the part above your regular rate counts: the "half" in time-and-a-half. If you earn $20 an hour and $30 for each overtime hour, $10 of every overtime hour qualifies. And the deduction lowers federal income tax only, up to $12,500 a year ($25,000 on a joint return).

I am a 1099 contractor. Can I use it?

Generally no. The deduction covers overtime that the Fair Labor Standards Act requires an employer to pay, and independent contractors are not covered by that rule. If you think you are really an employee, read our guide on 1099 vs W-2.

My employer pays double time. Does all of it count?

No. Only the portion the FLSA requires above your regular rate counts, which is one half of your regular rate for each overtime hour. Extra paid by your employer or a union contract beyond that does not qualify.

Where do I find my qualified overtime?

Starting with 2026, employers report it on your W-2 in box 12 with code TT. For 2025, employers were not required to report it separately, so you may need to figure it from your pay stubs.

Does it lower Social Security and Medicare taxes?

No. Those are still withheld from all of your pay, overtime included. The deduction only lowers the income tax on your return.

Do I need to itemize?

No. You claim it on Schedule 1-A along with the standard deduction. You need a valid Social Security number, and married couples must file jointly.

No Tax on Overtime Calculator 2026

Your overtime

overtime receipt · 2026