No tax on overtime calculator
Estimate your federal deduction for qualified overtime pay under the 2025 tax law, for tax years 2025 to 2028.
By the Sproutcalc team · Figures last checked · How we calculate
Your estimated deduction
$4,480
saves about $986 in federal income tax
- Qualified overtime premium
- $4,480
- Cap for your status
- $12,500
- Income phase-out
- $0
Your premium is above the cap, so the deduction stops at $12,500.
Your income is above $150,000, so the deduction drops by $100 for each $1,000 over.
We've used your W-2 code TT amount. The IRS says you can't claim more than it shows.
Married couples must file a joint return to claim this deduction.
An estimate, not tax advice. It doesn't include state tax, Social Security or Medicare, which still apply to overtime.
How we calculated this
- Premium per week = hourly rate × 0.5 × overtime hours. Only the half-time part above your regular rate qualifies.
- Qualified overtime = premium per week × weeks with overtime.
- Cap: $12,500, or $25,000 if married filing jointly.
- Phase-out: above $150,000 MAGI ($300,000 joint), the deduction falls by $100 for each full $1,000 over.
- Tax saved = deduction × your federal bracket. Your actual saving depends on your full return.
Sources
- IRS: Instructions for Form 1040, including Schedule 1-A
- IRS: FAQs on qualified overtime compensation (FS-2026-13, PDF)
- Our test results against IRS worked examples
Questions people ask
Is all my overtime pay tax-free?
No. Only the premium part, the extra half in time-and-a-half, is deductible, up to the cap. Social Security, Medicare and state tax still apply.
What if my W-2 code TT shows a different number?
For tax year 2026, the IRS says you can't claim more than the amount in code TT. If it looks wrong, ask your employer to check it before you file.
Which years does this cover?
Tax years 2025 through 2028. You claim it on Schedule 1-A with your Form 1040.