No tax on overtime calculator
Enter your overtime and see your federal deduction and a rough tax saving. It is an estimate.
Estimate your overtime deduction
- Qualified overtime (the half)
- $5,000
- Yearly cap
- $12,500
- Income phase-out reduction
- $0
- Estimated deduction
- $5,000
- Estimated federal tax saving
- $600
This is an estimate of federal income tax only. Social Security and Medicare (FICA) still apply to all your overtime. Check your state, which may tax it differently. This is not tax advice.
The saving assumes the standard deduction and that your MAGI is close to your adjusted gross income. From 2026 your employer reports the amount in box 12 of your W-2 with code TT.
Only the half counts
Say you earn $20 an hour and work an overtime hour. You are paid $30. Only the extra $10, the half of time and a half, is qualified overtime. The first $20 is your regular rate for that hour and does not count.
The formula is hours over 40 in the week, times 0.5, times your regular rate, added up over the weeks. At $20 an hour with 10 overtime hours for 50 weeks, that is $5,000 of qualified overtime.
It applies to hourly, non-exempt workers, and only to overtime the federal Fair Labor Standards Act requires. For double time the deduction still uses half your regular rate, says IRS guidance.
Need plain weekly pay first? Use the overtime calculator, or read how to calculate time and a half.
Questions about the overtime deduction
Is the whole overtime paycheck deductible?
No. IRS guidance says only the premium counts, the half of time and a half that the Fair Labor Standards Act requires.
How much can I deduct?
Up to $12,500 a year, or $25,000 on a joint return, for tax years 2025 to 2028 (IRS FS-2026-13 and 26 USC 225).
Does my income reduce it?
Yes. The statute reduces it by $100 for every $1,000 of modified adjusted gross income above $150,000, or $300,000 on a joint return.
Is it a tax credit or a refund of that amount?
Neither. IRS guidance calls it a deduction, so it lowers taxable income and the saving is roughly the deduction times your tax bracket. The overtime stays in your gross income.
Do I still pay Social Security and Medicare on overtime?
Yes. IRS guidance says the deduction does not change income tax withholding, Social Security, Medicare or federal unemployment tax on that pay.
I am married filing separately. Can I claim it?
No. Under 26 USC 225, a married person can claim the deduction only on a joint return.
My state or union contract pays daily or double time overtime. Does that count?
Only the part the Fair Labor Standards Act requires. IRS guidance says overtime from state law alone, a contract or a voluntary extra premium does not qualify, and exempt salaried employees get none.
How do I find my amount?
From 2026, your employer reports it in box 12 of your W-2 with code TT. For 2025, IRS Notice 2025-69 lets you use pay stubs and a reasonable method.
Track the hours with ExtraHalf
ExtraHalf logs your shifts and tips, shows how many hours remain before overtime, and estimates your qualified overtime for the year. It has no account, and your data stays on your phone. It is on Google Play for Android.
See what ExtraHalf does and what the overtime deduction covers.