No Tax on Overtime Calculator

• Only the premium is deductible. At time and a half, the extra 0.5× counts. The regular-rate part of overtime pay stays taxable.
• The cap is $12,500, or $25,000 filing jointly. That answers the most common question about this deduction: what is the cap on no tax on overtime.
• It runs from 2025 to 2028 under the law often called the OBBBA, and it is claimed on Schedule 1-A, with or without itemizing.
• High incomes phase it out. Above $150,000 of MAGI ($300,000 joint), the deduction falls by $100 for every $1,000 over.
• Your W-2 is the source. From 2026, qualified overtime appears in Box 12 with code TT.

Despite the name, this overtime tax calculator is not about a world where overtime is tax-free. "No tax on overtime" is the political nickname for a deduction in the One Big Beautiful Bill Act (the OBBB tax on overtime provision, as it is often typed). What the law actually does: for tax years 2025 through 2028, you may deduct the premium portion of overtime pay that the Fair Labor Standards Act required your employer to pay. If you earn $25 an hour and work an overtime hour at $37.50, exactly $12.50 of that hour is premium, and only that $12.50 builds your deduction.

Worked example. You earn $25 an hour and work 320 overtime hours in the year at time and a half. Your overtime pay is 320 × $37.50 = $12,000, but your qualified premium is 320 × $12.50 = $4,000. Filing single with an income under $150,000, your deduction is the full $4,000, and at the 22% bracket it saves you about $880 of federal tax. That is what this no overtime tax calculator computes, whichever way you enter your numbers.

Two more rules shape the result. First, the cap: no more than $12,500 of premium can be deducted on a single return, or $25,000 on a joint return. Second, the phase-out: once your modified adjusted gross income passes $150,000 ($300,000 joint), the deduction is reduced by $100 for each $1,000 above the line, until it disappears. A tax free overtime calculator that ignores either rule will overstate your refund, which is why both are built into the tool above.

To qualify, all of the following must be true:

• Your overtime was FLSA-required. The premium must be for overtime the Fair Labor Standards Act mandated, generally hours over 40 in a workweek. Premium pay your employer chose to give, or that only a contract requires beyond FLSA rules, does not count.
• You have a valid Social Security number issued before the return's due date.
• If you are married, you file jointly. Married filing separately cannot claim the deduction.
• You file Schedule 1-A with your Form 1040 for a tax year from 2025 to 2028. You do not need to itemize; the deduction stacks on top of the standard deduction.

So, do union workers qualify for no tax on overtime? Yes: does no tax on overtime apply to union workers is one of the most asked questions about this law, and the answer is that union membership changes nothing. The test is whether the FLSA required the overtime. The same logic answers "do UPS drivers qualify for no tax on overtime": most drivers are hourly and non-exempt, so their FLSA-required premium generally qualifies, and their W-2 code TT amount is what counts. Exempt salaried managers and genuinely self-employed workers sit outside the deduction, because the FLSA does not require their overtime.

One boundary to know: this is a federal deduction. States set their own rules, so a search like "no tax on overtime Oklahoma" or "is overtime taxed in Oregon" is really about state tax. Most states still tax overtime pay in full at the state level, whatever the federal deduction does.

From tax year 2026, employers must report qualified overtime compensation in Box 12 of Form W-2, using code TT. That single number is the premium total for the year, and it is the figure that flows to Part III of Schedule 1-A. If the TT amount looks lower than the premium on your final pay stub, ask your employer for a corrected W-2 (Form W-2c): the reported figure acts as a ceiling, and you cannot raise it on your own with Form 4852.

For tax year 2025 the reporting was optional, and many employers simply did not do it. For a 2025 return, build the premium from your final pay stub of the year, using the same premium math as the estimator mode of the tax overtime calculator above.

When tax time comes, the claim itself is simple: the deduction is worked out in Part III of Schedule 1-A, added to any tips, car loan and senior amounts in Part VI, and the total lands on line 13b of Form 1040. Our Schedule 1-A guide walks through the whole form. And if you first need the pay itself checked, our overtime pay calculator splits any week into regular pay and overtime pay with taxes.

Rules verified against IRS Schedule 1-A and its instructions, October 2026. Estimates only, not tax advice.