# No tax on overtime calculator: figure your deduction and savings

Source: https://taxbracketsdesk.com/new-tax-law/overtime-deduction-calculator
Publisher: Tax Brackets Desk (taxbracketsdesk.com), independent editorial site
Topic: New Tax Law Deductions
Last updated: 2026-09-18

> A no tax on overtime calculator needs three numbers: the premium part of your FLSA overtime pay, your filing status and your modified AGI. The deduction is the premium (one third of time-and-a-half pay), capped at $12,500 or $25,000 joint, minus $100 per full $1,000 of MAGI above $150,000 ($300,000 joint). Multiply the result by your bracket rate to estimate savings.

## Key facts

- Deductible share of time-and-a-half pay: 1/3
- Deductible share of FLSA double-time pay: 1/4
- Cap: $12,500 ($25,000 married filing jointly)
- Phaseout: $100 per full $1,000 of MAGI over $150,000 ($300,000 joint)
- Tax years: 2025 through 2028

## 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](https://taxbracketsdesk.com/federal-tax-brackets/marginal-tax-rate-explained) 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](https://taxbracketsdesk.com/new-tax-law/w2-codes-tips-overtime) 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.

> **The regular rate is not always your base wage:** Under federal wage rules, the regular rate can include shift differentials and nondiscretionary bonuses. If your pay stub shows overtime paid on a rate above your base hourly wage, use that higher rate, or better, use the employer's code TT figure.

## 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.

| Step | Figure |
| --- | --- |
| Premium: $12 x 320 hours | $3,840 |
| Cap check (under $12,500) | $3,840 |
| MAGI $61,440 vs $150,000 threshold | No reduction |
| Taxable income before deduction ($61,440 - $16,100) | $45,340 |
| Taxable income after deduction | $41,500 |
| Tax before: $1,240 + 12% x $32,940 | $5,192.80 |
| Tax after: $1,240 + 12% x $29,100 | $4,732.00 |
| Federal income tax saved | $460.80 |

Overtime deduction for a single filer, 2026

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](https://taxbracketsdesk.com/federal-tax-brackets/what-tax-bracket-am-i-in).

> **What the estimate leaves out:** The deduction is taken after AGI on Form 1040 line 13b, so it does not raise credits that depend on AGI and does not cut payroll tax. State income tax may or may not follow the federal rule.

## 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](https://taxbracketsdesk.com/new-tax-law/no-tax-on-overtime-deduction) 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](https://taxbracketsdesk.com/new-tax-law) summary, and [does overtime get taxed more](https://taxbracketsdesk.com/new-tax-law/does-overtime-get-taxed-more) explains why paychecks with overtime look heavily taxed.

## Common questions

### How do I calculate my overtime deduction from my pay stub?

Take the year-to-date overtime pay and divide by 3 if it was paid at time-and-a-half, or by 4 if it was FLSA double time. Cap the result at $12,500 ($25,000 joint) and apply the income phaseout.

### How much will the overtime deduction save me?

Multiply the deduction by the tax rate on your top dollars of taxable income. A $3,000 deduction saves $360 at 12% and $660 at 22%, before any state effect.

### Does the overtime deduction lower my Social Security tax?

No. It only reduces federal income tax. Social Security and Medicare tax of 7.65% still apply to every dollar of overtime pay.

### Can I use the calculator for 2025 overtime?

Yes. The limits and phaseout are the same for 2025, but most 2025 W-2s have no code TT, so enter your rate and overtime hours or divide total overtime pay by 3. Use 2025 brackets for the savings step.

### What if my MAGI is just over the $150,000 threshold?

The reduction works in full $1,000 steps. MAGI of $150,999 is only 0 full thousands over, so there is no reduction; $151,000 cuts the deduction by $100.

## Sources

- [One Big Beautiful Bill Act: tax deductions for working Americans and seniors](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors)
- [Treasury and IRS guidance for individuals who received tips or overtime during tax year 2025](https://www.irs.gov/newsroom/treasury-irs-provide-guidance-for-individuals-who-received-tips-or-overtime-during-tax-year-2025)
- [Schedule 1-A (Form 1040), Additional Deductions](https://www.irs.gov/pub/irs-pdf/f1040s1a.pdf)
- [Rev. Proc. 2025-32, 2026 inflation adjustments](https://www.irs.gov/pub/irs-drop/rp-25-32.pdf)
- [Publication 505 (2026), Tax Withholding and Estimated Tax](https://www.irs.gov/pub/irs-pdf/p505.pdf)