How our calculators work
Follow the numbers from a workweek to gross pay, an eligible deduction, and estimated federal tax savings.
Start with the model's scope
Our tools use the ordinary FLSA model for a covered, nonexempt employee with a constant regular hourly rate and a 40-hour workweek. Actual regular pay can include items beyond a base wage. State daily overtime, multiple rates, bonuses, collective agreements, and special occupation schedules may require a different calculation.
The federal deduction calculator supports tax years 2025 and 2026. The statutory deduction period runs through 2028, but we do not provide unverified 2027 or 2028 tax-bracket estimates. Confirm eligibility before interpreting a number.
Sources: DOL overtime requirements and IRS qualified overtime guidance.
1. Count hours by workweek
The timesheet calculator converts each shift to minutes, subtracts the unpaid break you enter, and adds minutes within each seven-day workweek. Start the sheet on the employer's fixed workweek boundary. It does not decide whether a break is legally unpaid.
An end time earlier than a start time means an overnight shift. Equal start and end times mean zero hours. A shift crossing the end of a workweek must be split at that boundary. Missing times, overlapping overnight shifts, and breaks longer than a shift produce an error instead of a final usable total.
Regular hours = min(weekly hours, 40)
Overtime hours = max(weekly hours − 40, 0)For a two-week pay period, we calculate each week separately and add the results. For example, 45 hours followed by 35 hours produces 75 regular hours and 5 overtime hours, not 80 regular hours.
2. Separate gross pay from the qualifying premium
The pay calculator multiplies regular hours by the hourly rate and overtime hours by the rate and selected overtime multiplier. The annual tax estimate uses overtime hours per week multiplied by weeks with overtime.
Gross overtime pay = regular rate × overtime hours × pay multiplier
Estimated qualified premium = regular rate × overtime hours × 0.5At $20 per hour and 10 qualifying overtime hours paid at time-and-a-half, gross overtime is $300 and the estimated qualified premium is $100. Paying those same hours at double time raises gross overtime to $400; the model still estimates a $100 FLSA-required premium. The tax deduction is not the full $300 or $400.
Read the assumptions and exceptions in qualified overtime compensation. Where an employer-reported qualified amount is entered, it replaces only the premium estimate. It does not replace gross pay or the income used for the phaseout.
3. Apply eligibility, the cap, and the income phaseout
Eligible non-joint filers have a maximum annual deduction of $12,500; a joint return has a combined $25,000 limit. Married taxpayers must file jointly. The tool asks about eligibility without collecting a Social Security number.
We take the smaller of qualified overtime and the annual cap, then reduce it by $100 for each complete $1,000 of modified adjusted gross income above $150,000 for non-joint filers or $300,000 for joint filers. The result cannot be negative.
Reduction = floor(max(MAGI − threshold, 0) ÷ 1,000) × 100
Allowed deduction = max(min(qualified overtime, cap) − reduction, 0)For example, $4,000 of qualified overtime and $160,500 of MAGI for an eligible single filer gives ten complete $1,000 steps, a $1,000 reduction, and a $3,000 deduction. Smaller initial deductions disappear before the income level at which the maximum deduction would disappear.
Source: Schedule 1-A, Part III. Our model uses the currently published completed-thousand-dollar calculation; check the final instructions for the tax year you file.
4. Compare federal income tax before and after
Without an override, we approximate MAGI as the annual income excluding overtime plus gross overtime pay. For a joint return, that input needs to reflect both spouses. We then approximate taxable income by subtracting the selected year's basic standard deduction.
Use the MAGI and taxable-income overrides when adjustments, itemizing, dependent status, age or blindness additions, or other deductions make those assumptions unsuitable. Enter taxable income before the overtime deduction so it is not subtracted twice.
Tax saved = tax(taxable income before deduction)
− tax(max(taxable income before deduction − allowed deduction, 0))The tax function applies progressive ordinary-income brackets for the selected year and filing status. It computes tax on both amounts before rounding the difference to cents. Multiplying the entire deduction by a single marginal rate can be wrong when the deduction crosses a bracket boundary.
This is not a paycheck withholding or refund calculation. It excludes state income tax, Social Security, Medicare, tax credits, capital gains treatment, and alternative minimum tax. A deduction larger than remaining taxable income cannot create negative ordinary income tax in this model.
5. Use the right records for the right year
For 2025, the IRS provides transition methods using appropriate employer information and pay records. For 2026, qualified overtime is separately reported, with code TT in Form W-2 box 12. An hours-based estimate is a planning aid, not a replacement for resolving missing or inaccurate employer reporting.
Keep the supporting records and ask your employer about discrepancies. An overstated reported amount does not make excess wages deductible. Sources: Notice 2025-69 and 2026 W-2 and W-3 instructions.
Check the result, not just the headline
Review the chosen year, filing status, overtime hours, and eligibility before relying on a result. Money is displayed to cents; timesheet minutes are added before converting to hours. A displayed hourly tax benefit is the estimated tax saving divided by annual overtime hours, not your net hourly wage.
Our editorial policy explains source selection and corrections. To report a mismatch, use Contact and share an invented example that reproduces it. Do not send a W-2, SSN, or other private financial documents.