No tax on overtime calculator: figure your deduction and savings

How the no tax on overtime calculator works

The calculator follows the same order as Schedule 1-A Part III: find the qualified amount, cap it, then reduce it for income. The last step, which the form does not do, converts the deduction into dollars of federal income tax saved using the 2026 brackets.

A deduction lowers taxable income, not your tax bill dollar for dollar. So a $4,000 deduction is worth $480 to someone whose top dollars sit in the 12% bracket and $880 to someone in the 22% bracket. Our page on marginal tax rate explains why only the rate on your last dollars matters here.

Inputs you need for the overtime deduction calculator

Gather these before you start. For 2026 wages, the first item should be printed on your W-2, which removes most of the guesswork.

• Qualified overtime amount: Form W-2 box 12 code TT, Form 1099-NEC box 1d or Form 1099-MISC box 14. Our guide to W-2 codes TT and TP shows where each one sits.
• Regular rate and overtime hours: only needed if no code TT amount was reported, as on most 2025 W-2s. Use year-end pay stubs.
• Filing status: the cap doubles only for married filing jointly. Married filing separately cannot claim the deduction.
• Modified AGI: your AGI from Form 1040 plus any excluded Puerto Rico income or foreign earned income and housing amounts.
• Taxable income before this deduction: AGI minus your standard or itemized deduction and any other Schedule 1-A deductions.

How to calculate overtime deduction amounts: the formula

Here is the math the tool runs, step by step. Round nothing until the phaseout step, where the form tells you to drop fractions.

1. Premium: 0.5 x regular rate x FLSA overtime hours. From a total overtime figure, divide time-and-a-half pay by 3, or FLSA double-time pay by 4.
2. Cap: keep the smaller of the premium or $12,500 ($25,000 joint).
3. Excess income: subtract $150,000 ($300,000 joint) from modified AGI. If the answer is zero or negative, skip to step 5.
4. Reduction: divide the excess by $1,000, drop any fraction, and multiply by $100.
5. Deduction: capped amount minus the reduction, never below zero.
6. Savings: figure tax on taxable income with and without the deduction and take the difference.

Is the deduction the full time-and-a-half?

No. The straight-time part of every overtime hour is ordinary pay. At $26 an hour with overtime paid at $39, only $13 of each overtime hour counts. That is why the calculator asks for the premium, not the total overtime line on your pay stub.

Worked example for a warehouse worker

A single forklift operator earns $24 an hour and works 320 FLSA overtime hours in 2026 at $36 an hour. Overtime pay is $11,520 and regular pay is $49,920, so AGI is $61,440 with no other income.

The $460.80 is exactly 12% of $3,840 because the whole deduction came out of the 12% bracket. The worker still pays 7.65% Social Security and Medicare tax on all $11,520 of overtime, which is $881.28.

When the deduction crosses a bracket line

A single machinist with $52,000 of taxable income before the deduction and a $4,000 premium drops to $48,000. The first $1,600 comes out of the 22% bracket (above $50,400) and the other $2,400 out of the 12% bracket, so the saving is $352 plus $288, or $640, not a flat 22%.

How does the phaseout reduce it?

A married couple filing jointly has $18,000 of combined premium pay and MAGI of $318,400. The excess over $300,000 is $18,400, which counts as 18 full thousands, so the reduction is $1,800 and the deduction is $16,200. At $550,000 of MAGI the joint cap is gone; for single filers that point is $275,000.

Estimated tax savings at your bracket

If your whole deduction fits inside one bracket, savings equal the deduction times that rate. The chart shows a $5,000 deduction at each 2026 rate where the full deduction is realistic.

The 35% and 37% brackets are left off because single filers reach 35% at $256,225 of taxable income, by which point MAGI has usually wiped out most of the $12,500 cap. Not sure which rate applies to you? Use what tax bracket am I in.

What to do with your result

Compare your estimate with the code TT amount when your W-2 arrives in early 2027. If the employer's number is higher than your calculated premium, ask payroll whether it includes the straight-time part. The full eligibility rules, including who counts as non-exempt, are on our no tax on overtime page.

If you expect a large deduction every year through 2028, you can list it on Form W-4 Step 4(b) so less tax is held back each payday. The overtime rules sit alongside three other deductions covered in our One Big Beautiful Bill tax changes summary, and does overtime get taxed more explains why paychecks with overtime look heavily taxed.