No Tax on Overtime Deduction Calculator (2026)
Estimate your federal income tax deduction from the OBBB qualified overtime premium deduction. Only the FLSA premium portion qualifies — not your entire overtime check.
Written by Wanyu T | Last reviewed: November 5, 2026
As a new overtime tax rules calculator, this tool shows how OBBB §70202 created a federal income tax deduction, claimed on Schedule 1-A (IRS Notice 2025-69), for the premium portion of FLSA-required overtime compensation for tax years 2025–2028. The maximum deduction is $12,500 for Single/HoH filers and $25,000for MFJ. The “premium portion” is the extra 50% in a 1.5× rate: for total overtime pay of $9,000 at 1.5×, the premium is $3,000 (one-third), not $9,000.
Phase-out: the deduction is reduced by $100 per $1,000 of MAGI above $150,000 (Single) or $300,000 (MFJ) per OBBB §70202. The deduction is for federal income tax only — FICA (Social Security 6.2% + Medicare 1.45%) is unchanged on all wages including overtime (IRC §3101, per IRS Notice 2025-69).
Worked example: single worker, $9,000 total 1.5× overtime, $60,000 MAGI, 22% rate. Premium = $9,000 / 3 = $3,000. Below $12,500 cap, below $150,000 phase-out threshold. Allowed deduction = $3,000. Tax savings = $3,000 × 22% = $660.
How to use this calculator
- Select your filing status.
- Enter your total annual overtime compensation and select your overtime multiplier (1.5× is most common).
- Enter your MAGI to check the phase-out.
- The calculator isolates the premium portion and applies the deduction caps.
Formula and assumptions
premiumPortion = totalOT × (0.5 / multiplier) ← FLSA cap: 0.5× on regular rate For 1.5x: premium = totalOT / 3 (0.5 / 1.5) For 2.0x: premium = totalOT / 4 (0.5 / 2.0) ← not totalOT / 2 cap = $12,500 (Single/HoH) or $25,000 (MFJ) phaseOut = ceil(max(0, MAGI − threshold) / 1,000) × 100 allowedDeduction = max(0, min(premium, cap) − phaseOut) threshold = $150,000 (Single/HoH) or $300,000 (MFJ)
- FLSA required
- Only FLSA-required overtime qualifies; state-only or CBA overtime may not
- FLSA premium cap
- Deductible premium is limited to the FLSA-mandated 0.5× portion of the regular rate, regardless of actual pay multiplier
- Sunset
- Deduction available 2025–2028
- MFS ineligible
- Married Filing Separately cannot claim
- FICA
- Still subject to payroll tax
Worked examples
Single worker, $9,000 total overtime at 1.5×, $60,000 MAGI, 22% rate
Married filing jointly, $60,000 total overtime at 2.0×, $200,000 MAGI, 22% rate
Single, $18,000 total overtime at 1.5×, $165,000 MAGI, 24% rate
Married filing separately: the same $9,000 of total overtime at 1.5× has a $3,000 premium, but MFS filers are ineligible for the deduction, so the allowed deduction is $0. Filing jointly is required to claim it.
2025 vs. 2026 reporting
The deduction is available for tax years 2025 through 2028; what differs between 2025 and 2026 is how the amount is reported. For tax year 2025, IRS Notice 2025-69 provides interim guidance: employers may report qualified overtime in W-2 Box 14, and workers use that amount, with their own pay records, for the deduction.
For tax year 2026 and later, employers must report qualified overtime compensation separately, so the premium amount should be identified on its own rather than only as a Box 14 note. Keep your pay stubs until the W-2 arrives, and check that the reported amount matches the premium portion only, not your full overtime pay.
See the 2026 tax-changes guide for the full comparison of the four OBBB additional deductions, and the tips deduction calculator if you also earn tips. See all ten tax calculators on the tax hub.
Limitations
- Only FLSA-required overtime qualifies — not all overtime pay.
- Deductible premium is capped at the FLSA-mandated 0.5× portion; double-time (2.0×) pay yields totalOT / 4, not totalOT / 2, because only the statutory overtime premium is deductible.
- Premium portion calculation is an estimate when employer has not separately reported it.
- Does not reduce FICA liability.
- Sunsets after 2028 unless extended.
- QSS (Qualifying Surviving Spouse) is treated as Single for cap and threshold; verify OBBB §70202 for your status.
- Educational estimate only — not professional tax advice.
Frequently asked questions
The OBBB overtime deduction allows workers to deduct the FLSA overtime premium portion from federal taxable income — up to $12,500 (Single) or $25,000 (MFJ) per year. You cannot deduct your entire overtime paycheck — only the extra premium portion.
Recent updates
- Nov 2026Retitled to Overtime Deduction Calculator (2026); added worked examples across filing statuses and multipliers, a 2025 vs. 2026 reporting explainer, and links to the tips calculator and 2026 tax-changes guide; corrected the metadata description from a weekly cap to the annual cap.
- Nov 2026Corrected eligibility wording: MFS filers are ineligible for the deduction (they were incorrectly listed in the $12,500 cap group); deduction placement clarified as Schedule 1-A (IRS Notice 2025-69) rather than above-the-line.
- May 2026Formula corrected: FLSA cap applied to multipliers above 1.5× (FLSA mandates 0.5× premium only; 2.0× now yields totalOT / 4, not totalOT / 2); phase-out uses 'fraction thereof' rounding (Math.ceil); schema hardened against non-finite inputs; monetary outputs rounded to cents.
- Jul 2025OBBB §70202 enacted; overtime premium deduction caps confirmed at $12,500 Single / $25,000 MFJ.
- May 2025IRS Notice 2025-69 issued on FLSA qualifying overtime premium definition; calculator notes updated.
- Apr 2025Pre-launch draft based on OBBB bill text; premium-portion formula locked on statute enactment.