Schedule 1-A overtime deduction

No Tax on Overtime Calculator

What the 2026 overtime deduction is worth to you. Only the extra half of time and a half counts, up to $12,500 ($25,000 joint), and it phases out above $150,000 of income.

Your numbers

How much the overtime deduction saves you

Only the extra half of time and a half is deductible, up to $12,500 ($25,000 on a joint return). Social Security and Medicare still apply.

NO TAX ON OVERTIME

Deductible: the premium half of each overtime hourTax year 2026 · IRS Schedule 1-A · 2025–2028

Filing status

Income for the year$All pay and other income, less pre-tax 401(k) and health premiums (your AGI)

Regular hourly rate$/hr

Overtime hours a weekhrsHours over 40 in a workweek

Weeks with overtimewks

Use your W-2 figure, or add your age

Or the amount on your W-2$Box 12, code TT. Leave blank to use the estimate

Age 65 or older by December 31?Born before January 2, 1962

Federal income tax saved

$360On a $3,000 deduction, at a top federal rate of 12%

$37.50 an overtime hour, of which $12.50 is the premium: $3,000 for the year.

Deduction$3,000Full amount

Taxable income$35,900$38,900 without it

Federal income tax$4,060$4,420 without it

Gone completely at$275,000Income (AGI) where the deduction reaches $0

How we got this

Income for the year (AGI)Schedule 1-A line 3. The new deductions do not lower it.$55,000
No tax on overtime (Part III)$3,000 entered, capped at $12,500.$3,000
Standard deduction$16,100 for single, 2026.$16,100
Taxable income$38,900 without the new deductions.$35,900
Federal income tax$4,420 without them: $360 less.$4,060

What we assumed

Figures from the IRS's 2026 Schedule 1-A draft and Revenue Procedure 2025-32. The deductions apply to tax years 2025 through 2028.
Standard deduction, no itemizing, no qualified business income deduction and no credits. Credits come off the tax afterward and can make the real saving smaller.
Tips and overtime are still subject to Social Security and Medicare, and to state income tax unless your state has adopted the same deduction.
Assumes a valid Social Security number for everyone claiming, which each of the four deductions requires.

Technical details

Method schedule-1a-v1.0.0Data us-tax-2026-v1, irs-schedule-1a-2026

Discrepancy in the numbers? You can click Report incorrect result below or email hello@costanswer.com with the Method and Data lines.

Guide

What "no tax on overtime" actually covers

CostAnswer editorialIndependent calculator publisher

From 2025 through 2028, the extra pay you get for overtime comes off your taxable income, up to $12,500 a year ($25,000 for a married couple filing jointly). It is a deduction on your federal return, not tax-free overtime: the regular part of each overtime hour is taxed as before, and Social Security and Medicare still come out of all of it.

Only the premium half counts

Work an overtime hour at $20 an hour and you are paid $30. The $20 is ordinary pay. The extra $10, the "half" in time and a half, is the qualified overtime compensation the deduction covers. So ten hours of overtime at $20 an hour puts $100 on the deduction, not $300.

It has to be overtime the Fair Labor Standards Act requires: hours over 40 in a workweek for a non-exempt employee. Daily overtime that only a state requires, double time or other premiums a union contract adds beyond time and a half, and bonuses called "overtime" for salaried exempt staff do not count.

Where the number comes from

For 2026 your employer is to report the qualified amount on Form W-2 in box 12 with code TT. If the box is there, use that figure: it is what the IRS will match. If you are estimating mid-year, the calculator works it out from your hourly rate, overtime hours and weeks.

The deduction is claimed on Schedule 1-A, Part III, and flows to Form 1040 line 13a. You take it whether you itemize or use the standard deduction.

How much tax it really saves

A deduction saves the tax on the income it removes, at the rate that income would have paid. For a single worker earning $55,000, most of the deduction comes out of the 12% bracket: $3,000 of qualified overtime saves about $360. Someone in the 22% bracket saves $660 on the same amount.

Above $150,000 of income ($300,000 joint) the cap shrinks by $100 for every full $1,000 over. A single filer at $275,000 has nothing left.

Questions about this calculator

Is overtime tax-free now?

No. Only the premium part of overtime pay is deductible, up to $12,500 a year ($25,000 joint), and only for federal income tax. The regular-rate part of every overtime hour is taxed as usual, and Social Security and Medicare are withheld from all of it.

Will my paycheck go up?

Not automatically. Employers keep withholding as before, so the saving usually shows up as a bigger refund or smaller balance due when you file. You can bring it forward by lowering withholding on a new Form W-4, using the deductions line.

Do I get it if I am salaried?

Only if you are non-exempt under the FLSA and are paid time and a half for hours over 40. Most salaried managers and professionals are exempt, and any extra they are paid for long weeks is not qualified overtime.

Does my state tax overtime?

Usually yes. The deduction is federal. A state only follows it if its own law adopts it, so check your state tax agency before assuming state withholding will change.

Can I claim it if I am married filing separately?

No. Married people must file a joint return to take the overtime deduction.

Terms used here

Qualified overtime compensation: The premium above your regular rate that the FLSA requires for hours over 40 in a workweek. At time and a half, one-third of each overtime hour's pay.
Box 12, code TT: Where Form W-2 reports qualified overtime compensation for 2026.
Schedule 1-A: The IRS form, new for 2025, where the tips, overtime, car loan interest and senior deductions are claimed.
Non-exempt: An employee the FLSA entitles to overtime pay, usually hourly workers.

Practical tips

Use the W-2 box 12 code TT amount when you have it; it replaces any estimate.

If the saving matters to your monthly budget, update your W-4 rather than waiting for the refund.

Keep pay stubs that show overtime hours and rates in case the W-2 figure is missing or wrong.

Limits and caveats

Federal income tax only. Social Security, Medicare and most state taxes still apply to all overtime pay.

The deduction ends after 2028 unless Congress extends it. This is an estimate, not tax advice.

Results are for information. They are not legal, tax, medical, or financial advice. How the math is maintained · Report a wrong figure.

How this is calculated

What the calculation includes, what it leaves out, and how it rounds.

What counts. The premium the Fair Labor Standards Act requires for hours over 40 in a workweek: at $20 an hour, the $10 on top of the regular rate in each $30 overtime hour. Daily overtime a state requires, extra pay a union contract adds beyond time and a half, and overtime for workers the FLSA exempts do not count. Employers are to report the amount on Form W-2, box 12, code TT.
The cap and the income limit. Up to $12,500 a year, or $25,000 on a joint return. Above $150,000 of income ($300,000 joint), it loses $100 for every full $1,000 over, as Schedule 1-A lines 22 to 27 set out. Married people have to file jointly to take it.
The tax saved. Federal income tax is worked out twice on the same year, with and without the deduction, using the 2026 brackets and standard deduction. The difference is the saving. Credits are not included, so someone who already owes little tax can save less than this shows.

Calculation receipt

What each number here is

This answer is built from published figures. Each one is named below, with the release it came from.

VERIFIEDIRS Schedule 1-A (2026): Sets the figures this answer is made of. Without it the page says so rather than estimating.
VERIFIEDIRS and state revenue departments: Sets the figures this answer is made of. Without it the page says so rather than estimating.

If a source above is unavailable or out of date: The deduction caps and income limits are set by the 2025 tax law and printed on Schedule 1-A; the tax saved needs the 2026 brackets. Without either, the page has no honest number to give.

Sources

Where this data comes from

Internal Revenue Service2026 Schedule 1-A (Form 1040), Additional Deductions, early release draft. Parts I to VI: the caps, MAGI thresholds and reduction steps used here, line by line. Draft created June 16, 2026; the IRS marks drafts not for filing.Checked 2026-09-29 ↗Internal Revenue ServiceIRS, Working Families Tax Cuts: tax deductions for working Americans and seniors. Eligibility: valid Social Security number, joint return if married, tips in a listed occupation, overtime required by the FLSA, new U.S.-assembled vehicles, age 65 by the end of the year. Tax years 2025 through 2028.Checked 2026-09-29 ↗Internal Revenue ServiceIRS Revenue Procedure 2025-32, section 4.13. 2026 additional standard deduction for the aged or blind: $1,650, or $2,050 if unmarried and not a surviving spouse.Checked 2026-09-29 ↗Internal Revenue ServiceRevenue Procedure 2025-32: the 2026 brackets and standard deduction the tax saved is worked out with.Tax year 2026 ↗