FEDERAL TAX · TAX YEAR 2026
2026 Overtime tax calculator
Estimate the qualified overtime deduction and its federal income-tax savings for tax year 2026, generally filed in 2027. The deduction commonly called “no tax on overtime” applies to an eligible premium portion, with annual and income limits.
Your deduction and savings
Which portion of overtime qualifies?
In the usual time-and-a-half arrangement, only the additional half-rate premium required by the Fair Labor Standards Act qualifies. At a $20 regular hourly rate, 10 eligible overtime hours pay $300 in total: $200 regular pay plus a $100 premium. Enter $100. Weekend, holiday or state-law overtime alone does not establish FLSA eligibility. Even with double-time pay, only the FLSA-required half-rate premium qualifies in this usual arrangement.
For 2026 employees, the deduction cannot include more qualified premium than properly reported on Form W-2 box 12 code TT, or more than actually qualified. Ask the employer for Form W-2c if the amount is missing or understated. Special FLSA methods, federal employees and rare 1099 reporting cases require employer-specific determination; this tool does not derive that premium.
2026 deduction limits and eligibility
| Filing status | Annual cap | MAGI threshold |
|---|---|---|
| Single / head of household | $12,500 | $150,000 |
| Married filing jointly | $25,000 combined | $300,000 |
| Married filing separately | Not eligible | Not applicable |
The deduction is available for 2025 through 2028, whether you itemize or take the standard deduction. Married taxpayers must file jointly. Each person whose overtime is claimed must satisfy the employment-valid SSN requirement. A “No” eligibility answer or married-filing-separately status produces a zero deduction with an explanation.
How this calculator works
First cap the qualified annual premium at $12,500, or $25,000 jointly. Subtract $100 for each complete $1,000 of MAGI above the threshold, rounding the number of thousands down under Schedule 1-A Part III. For example, single-filer MAGI of $150,001 causes no reduction; $151,000 causes a $100 reduction. Floor the remaining deduction at zero.
Subtract the eligible deduction from ordinary taxable income without going below zero. Compare progressive federal income tax before and after using the 2026 bracket tables. Savings may span more than one bracket. A deduction beyond taxable income adds no savings in this model.
Worked example
A single filer with $80,000 MAGI, $63,900 ordinary taxable income and $10,000 qualified premium receives a $10,000 deduction if eligible. Taxable income becomes $53,900; federal income tax before credits falls from $8,770 to $6,570, a $2,200 saving. At $151,000 MAGI, the same premium instead leaves a $9,900 deduction after the $100 phaseout reduction.
Does “no tax on overtime” remove payroll withholding?
Social Security and Medicare taxes still apply under their usual rules. Employers still withhold income tax on overtime; an updated valid Form W-4 can account for an expected deduction. This calculator estimates annual income-tax savings, not a paycheck, refund or final return liability. Credits, AMT, state taxes and interactions with other deductions are excluded.
Official sources
- IRS August 2026 overtime FAQ, FS-2026-13: qualified premiums, employer reporting, withholding and SSN eligibility.
- IRS Schedule 1-A, Part III: cap and phaseout method (2025 form currently available).
- IRS Notice 2025-69: statutory deduction and 2025 transitional guidance; the 2025 reporting relief does not extend to 2026.
- IRS Revenue Procedure 2025-32: 2026 ordinary income-tax brackets.
Related calculators
Explore tax on additional income, deduction savings, effective tax rates or the 2026 federal refund estimator.