How to use this calculator
- Choose the tax year and the filing status you will use.
- Enter your wages from box 1 of Form W-2, with your overtime included. On a joint return, add your spouse's.
- Choose how you know your overtime. For 2026, use the qualified amount on your W-2 in box 12 with code TT. For 2025, or before you have your W-2, enter your total overtime pay, the overtime premium from your pay stubs, or your overtime hours and regular hourly rate.
- Enter your children under 17 for the child tax credit.
- Under More options, tick the age and blindness boxes that apply, and add other income, itemized deductions and any tips or car loan interest deductions you take.
The numbers already filled in are an example. Replace them with your own.
How it's calculated
The overtime deduction comes from section 225 of the tax code and Part III of Schedule 1-A. It covers only the overtime pay the Fair Labor Standards Act requires, and only the part above your regular rate. The calculator finds that amount, caps it, reduces it for high incomes, and then figures your federal income tax twice: once without the deduction and once with it. The difference is what the deduction is worth.
An example
Say you file single for 2026, your wages are $59,000, and $13,200 of that was overtime pay at time-and-a-half. The overtime hours were paid at one and a half times your regular rate, and the law requires only the extra half, so a third of the pay, $4,400, counts. That is under the $12,500 cap, and your income is under the $150,000 where the phase-out starts, so your deduction is $4,400.
Without it, your taxable income is $42,900 and your federal income tax is $4,903. With it, your taxable income is $38,500 and your tax is $4,375. The deduction is worth $528 to you. Social Security and Medicare tax on the overtime pay, about $1,010, stays the same.
The part that counts
The qualified amount is half your regular rate for each overtime hour. From total overtime pay at time-and-a-half, that is a third of the pay; at double time, a quarter, because pay above time-and-a-half doesn't count ($13,200 at double time counts $3,300). From the premium on a pay stub, it is the whole premium at time-and-a-half and half of it at double time. From hours and a rate, it is hours times half the rate. Your regular rate under the law includes most bonuses and shift pay, so it can be higher than your base rate.
The cap and the phase-out
The deduction is capped at $12,500, or $25,000 on a joint return, for the two of you together. It is then reduced by $100 for every full $1,000 of modified adjusted gross income over $150,000 ($300,000 on a joint return); a part of $1,000 is dropped. A single filer with $200,000 of income and the full $12,500 is $50,000 over, so the deduction falls by $5,000 to $7,500. It is gone once income reaches $275,000 ($550,000 on a joint return). The deduction is not available on a separate return by a married person.
Why the child tax credit matters
The deduction lowers your tax, but if the child tax credit already covers most of that tax, a lower tax may not help much. The credit's unused part can be paid to you as the additional child tax credit, up to $1,700 a child and 15% of your earnings over $2,500. Take a married couple with two children, $50,000 of wages and $12,000 of qualified overtime. The deduction lowers their income tax by $1,200 before credits. After credits, their tax is $0 either way, and their refundable credit rises by $783, so the deduction is worth $783 to them, not $1,200.
Assumptions and limits
- Only the overtime the Fair Labor Standards Act requires counts, usually the extra half for hours over 40 in a week. Your employer decides which part that is, and from 2026 reports it on Form W-2, box 12, code TT. The calculator doesn't decide whether your job is eligible for overtime; the Department of Labor's Fact Sheet #17A describes the main exemptions.
- With total overtime pay or a premium, the calculator assumes all of it was for overtime hours at the rate you enter. If you were paid at more than one rate, use hours and hourly rate.
- It figures federal income tax, the child tax credit, the credit for other dependents and the additional child tax credit. It does not figure the earned income credit (the deduction doesn't change it), the child and dependent care credit, education credits, the saver's credit or the premium tax credit. Those other credits can lower the tax the child credit is limited by, which can make the deduction worth less than shown.
- With three or more children and wages under $5,103, a second way of figuring the refundable credit (Schedule 8812, Part II-B) may give more; the calculator uses the first and says so when this applies.
- It does not include state income tax, the alternative minimum tax, the net investment income tax, self-employment income or tax, the 2026 charitable deduction for people who don't itemize, or the qualified business income deduction. Modified adjusted gross income is your adjusted gross income: the Puerto Rico and foreign income exclusions are not included.
- Below $100,000 of taxable income the tax comes from the IRS Tax Table, and at $100,000 or more from the Tax Computation Worksheet. For a year whose Tax Table is not printed yet, the calculator builds it the way the IRS does, from the middle of each $50 row.
- Social Security and Medicare tax is shown as a number only when you enter your total overtime pay, your job is covered by Social Security, and your wages are at or below that year's wage base and $200,000.
- The deduction lowers the tax on your return. It doesn't change what your employer withholds unless you give them a new Form W-4; the IRS Tax Withholding Estimator can help you fill one in.
- The deduction runs for 2025 through 2028 only. The person who earned the overtime needs a Social Security number valid for work.
Input field details
What to enter in each box, where to find the number, and how this calculator treats it. When two calculators give different answers from the same numbers, it's usually because they handle one of these differently.
Filing status
The status you will file under for the tax year.
How this tool treats itThe deduction is capped at $12,500, or $25,000 on a joint return, and starts to shrink above $150,000 of modified adjusted gross income, or $300,000 on a joint return. Head of household and qualifying surviving spouse use the $12,500 and $150,000 figures. Married people filing separately cannot take the deduction at all; to see it, choose married filing jointly and enter both spouses’ wages and income.
Wages, including overtime
Your wages for the year, with the overtime and any tips included. On a joint return, add your spouse’s.
Where to find itForm W-2, box 1. With more than one job, add the box 1 amounts.
How this tool treats itYour wages are also your earned income for the refundable part of the child tax credit. Modified adjusted gross income, which sets the phase-out, is your adjusted gross income (Form 1040 line 11b) here, because the foreign and possession income exclusions that would be added back are not included. The deduction itself does not lower it.
Allowed range$0 to $2,000,000
Not includedSelf-employment income. Overtime is employee pay under the Fair Labor Standards Act, so this calculator counts wages only.
How you know your overtime
Choose the figure you have: the qualified amount your employer reports, your total overtime pay, the overtime premium on your pay stubs, or your overtime hours and regular hourly rate.
How this tool treats itEach choice leads to the same number, the qualified overtime compensation. The calculator figures it from the exact amount and rounds once, to whole dollars. Only the fields for the choice you make are used.
Qualified overtime compensation
The qualified overtime your employer reports, in full. The cap is applied for you.
Where to find itFor 2026 and later, Form W-2, box 12, code TT. For 2025, box 14 of your W-2 or a separate statement from your employer, if it gave one.
How this tool treats itQualified overtime compensation is the part of your overtime pay above your regular rate that section 7 of the Fair Labor Standards Act requires: for most workers, the extra half of time-and-a-half. For 2026 and later, only the amount your employer includes on Form W-2 with code TT can be deducted; the other three choices estimate what that box should show.
Allowed range$0 to $1,000,000
Not includedOvertime paid above what the Act requires (double time, weekend or holiday premiums without 40 hours), and overtime paid under a state law or contract to someone the Act does not cover, does not count.
Total overtime pay
Everything you were paid for your overtime hours, both the regular part and the extra.
Where to find itYour pay stubs or year-end statement, if they show overtime pay separately.
How this tool treats itFLSA overtime is the pay the Fair Labor Standards Act requires for hours over 40 in a workweek, at least one and a half times your regular rate. At time-and-a-half, one third of the total counts; at double time, one quarter (the half above the regular rate that the Act requires, of pay that is twice the rate). With the overtime rate you enter, the qualified part is one half divided by that rate.
Allowed range$0 to $1,000,000
Not includedPay at more than one overtime rate in one total. If some hours were paid at time-and-a-half and some at double time, use hours and hourly rate instead, which gives the same answer at any rate.
Overtime premium
The part of your overtime pay above your regular pay for those hours.
Where to find itYour pay stubs, if they show the premium on its own line.
How this tool treats itAt time-and-a-half the whole premium counts. When overtime is paid at a higher rate, only the part the Act requires counts: at double time, one half of the premium (IRS Notice 2025-69, method C). With the rate you enter, the qualified part is one half divided by the rate minus one.
Allowed range$0 to $1,000,000
Overtime rate
The multiple of your regular rate your overtime was paid at: 1.5 for time-and-a-half, 2 for double time.
How this tool treats itUsed with total overtime pay or the overtime premium. The Act requires at least 1.5.
Allowed range1.5 to 4, in steps of 0.05
Overtime hours
Your FLSA overtime hours for the year: usually the hours over 40 in each workweek, added up.
Where to find itYour pay stubs or timesheets.
How this tool treats itThe qualified amount is one half of your regular rate for each overtime hour, the IRS’s own weekly formula. The rate your employer paid for those hours does not change it.
Allowed range0 to 4,000 hours
Not includedSome workers have overtime under other parts of the Act, such as a daily threshold for federal employees or a work period for police and firefighters. Use the amount your employer reports if it figures yours that way.
Regular hourly rate
Your hourly rate before overtime, in dollars and cents.
Where to find itYour pay stubs.
How this tool treats itThe Act’s regular rate includes most bonuses, commissions and shift differentials, not only the base hourly wage. If your employer’s overtime figure is based on a higher regular rate, use its figure.
Allowed range$0 to $1,000 an hour
Children under 17
Your qualifying children who are under 17 at the end of the year and have a Social Security number valid for work.
How this tool treats itThe child tax credit first reduces your income tax. What is left can come back to you as the additional child tax credit, the refundable part, up to a fixed amount a child and to 15% of your earned income over $2,500. The overtime deduction lowers your tax, which can leave more of the credit to be refunded, so its worth to a family can be a larger refund rather than a lower tax. The credit shrinks by $50 for each $1,000 (or part of one) of modified adjusted gross income over $400,000 on a joint return, or $200,000 otherwise.
Allowed range0 to 10
Not includedPart II-B of Schedule 8812, which can give a larger refundable credit to a family with three or more children and very low wages. The calculator uses Part II-A and says when Part II-B may give more.
65 or older
Tick it if you were born before January 2 of the year 64 years before the tax year (for 2026, before January 2, 1962). On a joint return, tick your spouse’s too if it applies.
How this tool treats itThe IRS treats you as reaching 65 on the day before your 65th birthday. Each tick adds to your standard deduction, and for 2025 through 2028 also gives a $6,000 senior deduction that shrinks by 6% of modified adjusted gross income over $75,000, or $150,000 on a joint return. A larger deduction elsewhere can mean the overtime deduction comes off income taxed at a lower rate.
Blind
Tick it if you are blind at the end of the year. On a joint return, tick your spouse’s too if it applies.
How this tool treats itBlind here means vision no better than 20/200 in the better eye with glasses or contacts, or a field of vision of 20 degrees or less. Each tick adds to the standard deduction.
Other dependents
Dependents who are not children under 17 with a Social Security number: an older child, a parent you support.
How this tool treats itEach gives a $500 credit against your income tax. It is never refundable.
Allowed range0 to 10
Other taxable income
Taxable income other than your wages, Social Security and qualified dividends and long-term gains: interest, pensions, IRA withdrawals, nonqualified dividends, net short-term gains.
Where to find itForm 1040 lines 2b, 4b and 5b, and nonqualified dividends (Form 1099-DIV box 1a minus box 1b).
Allowed range$0 to $5,000,000
Not includedSelf-employment profit, and losses. Enter a net loss as 0.
Qualified dividends and long-term capital gains
Qualified dividends plus your net long-term capital gain. Leave them out of other taxable income.
Where to find itForm 1099-DIV box 1b for qualified dividends; Schedule D, or 1099-DIV box 2a if you do not file Schedule D.
How this tool treats itThese are taxed at 0%, 15% or 20%, stacked on top of your ordinary income. The deduction lowers ordinary income first, so it can move some gains into the 0% band.
Allowed range$0 to $5,000,000
Social Security benefits
Your net benefits for the year. On a joint return, add your spouse’s.
Where to find itBox 5 of Form SSA-1099.
How this tool treats itPart of your benefits may be taxable, figured with IRS Publication 915’s worksheet. The overtime deduction comes after adjusted gross income, so it does not change how much of your benefits is taxable.
Allowed range$0 to $200,000
Adjustments to income
Deductions you take before adjusted gross income: a deductible IRA contribution, HSA contributions, alimony paid under a pre-2019 agreement.
Where to find itSchedule 1 (Form 1040), lines 11 through 20, 23 and 25.
How this tool treats itLeave out student loan interest, which the Social Security worksheet treats differently. 401(k) contributions are already out of W-2 box 1, so do not enter them here.
Allowed range$0 to $1,000,000
Itemized deductions
Your total itemized deductions, if you itemize. Leave it at 0 to use the standard deduction.
Where to find itSchedule A (Form 1040), line 17.
How this tool treats itThe calculator uses whichever is larger, your itemized total or your standard deduction. You can take the overtime deduction either way.
Allowed range$0 to $5,000,000
Tips and car loan interest deductions
Your qualified tips deduction and your car loan interest deduction, added together.
Where to find itSchedule 1-A (Form 1040), lines 13 and 30.
How this tool treats itSchedule 1-A is the form for the four deductions for 2025 through 2028: tips, overtime, car loan interest and the senior deduction. Its total goes on Form 1040 line 13b, after adjusted gross income and beside the standard or itemized deduction, so none of the four changes adjusted gross income. The senior deduction is figured for you from the age boxes; do not include it here. An amount counted as a qualified tip cannot also count as qualified overtime.
Allowed range$0 to $35,000
Questions
Is overtime tax-free now?
What part of my overtime counts?
What if my employer pays double time?
Do I need to itemize to take it?
What changes for 2026?
Can I take it if we file separately?
Why is my answer smaller than my tax bracket times the deduction?
Does my state follow it?
Version history
- September 25, 2026 (version 1.0.0): First version. The overtime deduction for 2025 and 2026 under Schedule 1-A Part III, priced as the difference between two federal income tax computations, including the child tax credit's refundable part.