See how the overtime deduction, income phaseout, and tax brackets affect your estimated federal tax bill.
For ordinary FLSA overtime, the qualified amount is the extra 0.5× regular rate. Even if your employer pays double time.
Understand qualified overtimeFederal income tax onlyState tax is excluded. Social Security and Medicare still apply.
Grounded in official guidanceQualified overtime is the premium required by FLSA Section 7. Higher contractual premiums don’t automatically qualify.
A little clarity, no commitmentEducational estimate, not tax advice. Check the IRS and U.S. DOL sources before filing.
Overtime tax savings begin with a deduction, not a special tax rate on every overtime dollar. This calculator separates gross overtime pay, qualified compensation, and the estimated federal income tax reduction.
Looking at the annual deduction? Try the no tax on overtime calculator.
First, determine the qualified FLSA premium. Apply the $12,500 non-joint or $25,000 joint limit. Then reduce that amount using the IRS income phaseout if MAGI exceeds $150,000 or $300,000, respectively.
The tax benefit is the difference between estimated federal income tax before and after the allowed deduction. Using taxable income for this comparison matters: MAGI determines the phaseout, while taxable income determines the ordinary income tax brackets.
Estimated savings = federal income tax before the deduction − federal income tax after the deductionSchedule 1-A first caps qualified compensation, then subtracts an income-based reduction. Its overtime worksheet rounds the number of income increments down to a whole number. Being slightly above the threshold does not necessarily cause an immediate reduction.
The deduction cannot go below zero. The income at which your deduction disappears depends on the qualified amount you started with; a smaller deduction runs out sooner than the maximum deduction. A reported W-2 amount does not bypass this calculation.
An overtime paycheck can show substantial withholding even when you expect to claim the deduction. Overtime wages remain subject to federal income tax withholding. IRS guidance allows employees to account for an expected deduction through a valid updated Form W-4.
A refund is the result of your complete return, including tax already paid and applicable credits. The savings shown here are not a promised refund or a prediction of your next paycheck. Payroll taxes and state income taxes are outside this federal income tax estimate.
For 2026 onward, reconcile qualified overtime with box 12, code TT on your W-2. If the amount is missing or too low, request a corrected W-2 from your employer; an estimate based on hours cannot replace that reporting requirement.
Use your tax return's MAGI and deductions when making a filing decision. Wage-only estimates can differ when you have other income, adjustments, itemized deductions, or credits. The examples below isolate the deduction and assume each stated tax rate applies to the entire deductible amount.
Single filer at $25 per hour; 4 overtime hours per week for 48 weeks at 1.5×. Assume MAGI is $60,000 and all of the deduction reduces income in an illustrative 12% bracket.
Single filer with $10,000 of correctly reported qualified compensation and MAGI of $160,900. Assume the remaining deduction falls entirely in an illustrative 24% bracket.
Single filer at $60 per hour; 10 overtime hours per week for 52 weeks at 1.5×. Assume MAGI is $111,800 and the allowed deduction falls entirely in an illustrative 22% bracket.
Plain answers to the things that can make overtime confusing.
Overtime remains part of wages. Eligible taxpayers may claim a federal deduction for qualified overtime compensation, but the deduction does not exempt the entire paycheck or remove payroll taxes.
The deduction does not create one. Your annual federal income tax calculation uses your taxable income and filing status; paycheck withholding is a separate calculation.
No. Schedule 1-A uses modified adjusted gross income to determine the phaseout. Taxable income is calculated after applicable deductions and is the basis for the ordinary income tax brackets.
It can reduce taxable income across a bracket boundary. In that case, portions of the deduction reduce income taxed at different rates, so one rate multiplied by the whole deduction can overstate savings.
The published Schedule 1-A overtime worksheet rounds income increments down. With only $1 above the threshold, that worksheet produces no reduction. Use the applicable year's IRS form when filing.
Not necessarily. Only the allowed deduction affects this calculation. Your final refund or balance due depends on the full return, withholding, other payments, and credits.
No. Code TT reports qualified compensation before your return's cap and income phaseout. You must also satisfy the filing, SSN, and other eligibility requirements.
Rules last verified: . Includes 2025 and 2026 guidance for the calculator’s year selector.