# No tax on overtime calculator for employers and employees

Canonical: https://finbryn.com/us/tools/no-tax-on-overtime-calculator

No tax on overtime lets you deduct the extra half of time-and-a-half pay, up to $12,500 ($25,000 married filing jointly) a year for 2025 through 2028, reduced once income passes $150,000 ($300,000 joint). Enter the regular rate, overtime hours and pay periods to see the qualified amount per pay period and for the year, then the deduction.

An estimate for planning from the IRS rules checked on the date below, not tax advice. Nothing you type is sent to us.

## Worked example

A warehouse worker earns a regular rate of $30 an hour and works 10 hours of FLSA overtime in each biweekly pay period, 26 periods a year. Time and a half pays $450 for those hours, but only the extra half is qualified: 0.5 x $30 x 10 = $150 a period, or $3,900 for the year.

Filing single with a modified adjusted gross income of $90,000, nothing is reduced and the deduction is $3,900. At $160,000 the income is 10 whole thousands over $150,000, so the deduction drops by 10 x $100 = $1,000 to $2,900.

## FAQ

**Q: What counts as qualified overtime for the no tax on overtime deduction?**

A: Only overtime pay that section 7 of the Fair Labor Standards Act requires, and only the part above the regular rate. For time and a half that is the extra half. The base wage for those hours is ordinary pay. Double time, weekend and holiday premiums, and state or contract overtime beyond what the FLSA requires are not qualified overtime.

**Q: How much overtime can I deduct?**

A: Up to $12,500 a year, or $25,000 on a joint return, for tax years 2025 through 2028. It is a deduction from taxable income, so the tax saved depends on your bracket. You need a social security number on the return, and a married taxpayer can claim it only by filing jointly.

**Q: How does the income phase-out work?**

A: The deduction drops by $100 for each whole $1,000 that modified adjusted gross income is over $150,000, or $300,000 on a joint return. The IRS form rounds the excess down to the next lower thousand. A single filer with the full $12,500 reaches zero at $275,000, and a joint filer with $25,000 reaches zero at $550,000.

**Q: How do employers report qualified overtime on the 2026 W-2?**

A: In box 12 with code TT, the total qualified overtime for the employee. The 2025 forms did not change, and the IRS gave employers penalty relief for 2025 for not reporting it separately. For 2025, employees may work out the amount with a reasonable method, such as one-third of time-and-a-half overtime pay shown on a statement.

**Q: Is overtime pay still subject to payroll tax?**

A: Yes. The deduction is on the employee's income tax return only. Overtime is still subject to income tax withholding and to the employer and employee share of social security and Medicare tax, and the deduction does not change what payroll withholds.

**Q: Does overtime from my state or my contract qualify?**

A: Only the part the FLSA requires. If your employer pays double time, or a state requires daily overtime, the qualified amount is still the FLSA premium: half the regular rate for each hour over 40 in a workweek. Ask payroll for your FLSA overtime hours and regular rate if the pay stub does not show them.

For employers, [US payroll coordination](/us/services/payroll-support/us-payroll-gusto-adp-rippling-deel) and [payroll journals and reconciliations](/us/services/payroll-support/payroll-journals-reconciliations) keep the payroll provider's reports tied to the ledger. Your payroll provider produces the Form W-2.

## Sources

1. [IRS, Notice 2025-69: qualified tips and qualified overtime compensation for 2025](https://www.irs.gov/pub/irs-drop/n-25-69.pdf) (2026-10-24)
2. [26 U.S.C. 225, Qualified overtime compensation](https://www.law.cornell.edu/uscode/text/26/225) (2026-10-24)
3. [IRS, Schedule 1-A (Form 1040), Additional Deductions, 2025](https://www.irs.gov/pub/irs-pdf/f1040s1a.pdf) (2026-10-24)
4. [IRS, Instructions for Forms W-2 and W-3, box 12 code TT](https://www.irs.gov/instructions/iw2w3) (2026-10-24)
5. [29 U.S.C. 207, Maximum hours (Fair Labor Standards Act section 7)](https://www.law.cornell.edu/uscode/text/29/207) (2026-10-24)

Last checked October 24, 2026

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