No Tax on Overtime Calculator 2026
Enter your 2026 wages and your overtime. The tax engine works out how much of the overtime is deductible, applies the cap and the income phase-out, adds the tips deduction if you have tips, and shows the federal income tax the deduction saves on your 2026 return.
Paying quarterly estimates as well? The 2026 estimated tax calculator works out the January 15 payment.
How does no tax on overtime work in 2026?
Overtime is still taxed when you are paid: it stays in your wages, with federal income tax withheld and Social Security and Medicare tax taken (IRS FS-2026-13). The change is a deduction on your return: you subtract the premium part of your overtime, the “half” in time and a half that federal law (the FLSA) requires, up to $12,500 ($25,000 on a joint return), less $100 for every full $1,000 of modified AGI over $150,000 ($300,000 joint), IRC §225. Example: a single 35-year-old earning $62,000, of which $24,000 was overtime pay at time and a half, has a premium of $8,000. It is deductible in full, $8,000, and cuts the 2026 federal tax from $5,263 to $4,303: $960 saved, 12.0% of the premium.
| Key number | 2026 |
|---|---|
| Overtime deduction: single, $8,000 premium in $62,000 of wages (§225(b)(1)) | $8,000 |
| … federal tax it saves | $960 |
| Overtime deduction: joint, $20,000 premium, MAGI $312,000 (§225(b)(2)) | $18,800 |
| … federal tax it saves | $4,512 |
| Tips deduction: single, $15,000 of tips in $42,000 of wages (§224) | $15,000 |
| … federal tax it saves | $1,770 |
| Overtime deduction married filing separately (§225(e)) | $0 |
An estimate from QuantCalc’s open tax engine (federal 2.3.1, state 1.14.2) for the 2026 tax year. Not tax advice: your return depends on facts this page does not ask about, so check a move with your tax preparer or custodian before acting. How the engine computes each line, with its official source: federal, state.
Run your own numbers in the calculator below: your wages, the overtime premium or your total overtime pay, and any tips.
Calculate your overtime deduction
This calculator prices one deduction. Your whole 2026 federal and state return, with the overtime and tips deductions on Schedule 1-A, the rest of your income and what you have paid, ending in a refund or an amount owed: 2026 tax return calculator (free: your federal and state refund or amount owed) →
An estimate from QuantCalc’s open tax engine (federal 2.3.1, state 1.14.2) for the 2026 tax year. Not tax advice: your return depends on facts this page does not ask about, so check a move with your tax preparer or custodian before acting. Federal only: the state tax engine does not model this deduction, and states treat overtime and tips under their own rules. How the engine computes each line, with its official source: federal, state.
What if I earn more than $150,000?
The deduction is reduced by $100 for each full $1,000 by which your modified adjusted gross income exceeds $150,000, or $300,000 on a joint return (§225(b)(2); the full-$1,000 rounding is Schedule 1-A’s). Example: a married couple, 45 and 43, earning $312,000 together with a $20,000 overtime premium are $12,000 over the joint threshold, so $1,200 of the deduction is lost and $18,800 remains. It saves them $4,512 of federal tax. With $275,000 of modified AGI a single filer’s full $12,500 is reduced to $0, and with $550,000 a couple’s $25,000 to $0. The tips deduction is reduced the same way, separately.
How does no tax on tips work?
Qualified tips get their own deduction of up to $25,000 per return, joint or not, with the same phase-out (IRC §224). They must be tips received in an occupation that customarily received tips; the full rules are in the statute. Example: a single 28-year-old earning $42,000, of which $15,000 was tips, deducts $15,000 and saves $1,770 of federal tax. Tips and overtime can both be deducted on the same return, each under its own cap.
Common questions
- Is overtime taxed in 2026?
- Yes, when it is paid: overtime stays in your wages, so federal income tax is withheld and Social Security and Medicare tax apply (IRS FS-2026-13, Q1 and Q8). What changed is a deduction on the return for the FLSA premium part of it, up to $12,500 ($25,000 joint) for 2025 through 2028. For a single earner with a $8,000 premium in $62,000 of wages the deduction saves $960 of federal tax.
- What part of my overtime is deductible?
- Only the premium the federal Fair Labor Standards Act requires above your regular rate: at time and a half, the “half”, which is one third of your total overtime pay. Overtime paid only under a state law, a union contract or an employer’s own policy does not count, and with double time only the half-time premium the FLSA requires counts (IRS FS-2026-13, Q4 and Q16). From 2026 your employer reports the qualified amount on Form W-2, box 12, code TT.
- Does the overtime deduction lower my AGI?
- No. It is taken on Schedule 1-A after adjusted gross income is figured, like the standard deduction (IRC §63(b)), and you can claim it whether you itemize or not (IRS FS-2026-13, Q1). In the single example AGI stays $62,000 while taxable income falls by the deduction.
- Can I claim it married filing separately?
- No. A married person must file a joint return to claim it (§225(e)): with the same $62,000 of wages and $8,000 premium, the deduction married filing separately is $0. A valid Social Security number on the return is also required (§225(d)).
- How do I get less tax withheld from my overtime?
- Your employer must keep withholding on all of it unless you give it a new Form W-4; the 2026 Form W-4 lets you enter the expected deduction in step 4(b) (IRS FS-2026-13, Q8 and Q9).
- Do states tax overtime?
- States set their own rules for overtime and tips, and this calculator does not model them: the figures here are federal only.
- How many years does no tax on overtime last?
- It applies to tax years 2025 through 2028: no deduction is allowed for a tax year beginning after December 31, 2028 (§225(g)).