No Tax on Overtime Calculator (2026)

See how much federal income tax the new overtime deduction could save you. Not sure what your overtime premium is? The helper below works it out.

Updated October 2026 ยท Uses 2026 IRS figures

Wages including overtime, before tax.
Only the extra half of time-and-a-half. Leave empty to use the helper below.
Your regular hourly pay.
Hours paid at time-and-a-half.
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Your result will appear here.

How the overtime deduction works

For tax years 2025 through 2028, you can deduct up to $12,500 of qualified overtime pay ($25,000 on a joint return). The deduction lowers your taxable income for federal income tax. It does not take the pay out of your income, and Social Security and Medicare tax are still taken from all of it.

If your income is above $150,000 ($300,000 on a joint return), the limit shrinks by $100 for every full $1,000 over that line.

What counts as qualified overtime

Only overtime that federal law (the Fair Labor Standards Act) requires counts, and only the part above your regular rate. For the usual time-and-a-half, that is the extra half. If you earn $20 an hour, your overtime rate is $30, and only the extra $10 an hour counts.

If your employer pays more than the law requires, such as double time, only the amount the law requires counts. Workers who are exempt from federal overtime rules cannot claim the deduction, and self-employed people cannot treat extra hours in their own business as qualified overtime.

Your W-2 decides what you can claim in 2026

Starting with tax year 2026, employers must report qualified overtime separately on your Form W-2, in box 12 with code TT. Under IRS guidance from August 2026 (Fact Sheet FS-2026-13), you can generally claim only the amount reported there. A pay stub or a substitute W-2 (Form 4852) cannot add to it. If the amount looks wrong, ask your employer for a corrected Form W-2c.

This calculator is an estimate for planning. Enter your own premium to see what you might save, then compare it with box 12, code TT when your W-2 arrives. The code TT amount is the total qualified overtime paid, so it can be higher than your final deduction, because the $12,500 limit and the income limit are applied on your tax return.

How to estimate your overtime premium

If your employer pays time-and-a-half, the premium is half of your hourly rate times your overtime hours: 0.5 x hourly rate x overtime hours. With $20 an hour and 5 overtime hours a week for 50 weeks, that is 0.5 x $20 x 250 hours = $2,500. The law counts overtime week by week, so the figure your employer reports is the one that matters.

Worked examples

Each example uses 2026 figures. The income already includes the overtime.

Single, $45,000 income, $3,000 overtime premium. Federal tax falls from $3,220 to $2,860, a saving of $360.

Single, $70,000 income, $6,000 overtime premium. Federal tax falls from $6,570 to $5,500, a saving of $1,070.

Married filing jointly, $110,000 income, $9,000 overtime premium. Federal tax falls from $8,840 to $7,760, a saving of $1,080.

Single, $160,000 income, $12,500 overtime premium. Income is $10,000 over the $150,000 line, so the limit shrinks by $1,000 to $11,500. Federal tax falls from $27,134 to $24,374, a saving of $2,760.

Common mistakes

Questions

Is overtime pay tax-free now?

No. The deduction lowers your federal income tax, but overtime is still part of your income, and Social Security and Medicare tax still apply.

How much overtime can I deduct?

Up to $12,500, or $25,000 on a joint return, for tax years 2025 through 2028, and only the premium part that federal law requires.

Does my employer have to report it?

Yes. For tax year 2026 and later, qualified overtime is reported in box 12, code TT of your Form W-2, and generally only that amount can be claimed.

Will my paychecks get bigger?

Not automatically. Your employer can lower withholding only if you give them an updated Form W-4 that accounts for the deduction. Otherwise the benefit shows up when you file your return.

Sources and review

Last reviewed October 2026. Brackets and standard deduction: IRS Revenue Procedure 2025-32. IRS guidance on this deduction was updated in August 2026, so confirm the latest rules at IRS.gov before you file.

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