No tax on overtime calculator
Enter your hourly rate and weekly overtime to estimate your deduction. Only the extra half of time and a half counts. The calculator applies the $12,500 limit ($25,000 jointly) and the income phase-out, and shows the federal income tax you save.
Tax years 2025 to 2028, checked against IRS guidance in October 2026
Salaried and paid overtime? Divide your weekly salary by the hours it pays for.
Only hours over 40 in a workweek count. Overtime for long days, such as California's after 8 hours, doesn't.
Box 12, code TT. For 2025, when employers didn't have to report it, add up the extra half from your pay stubs.
Your deduction
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- Qualified overtime for the week
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- Qualified overtime for the year
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- Federal income tax saved, about
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Only the extra half of time and a half for hours over 40 in a week counts, up to $12,500 a year.
This is an estimate. Social Security and Medicare (7.65%) and most state income taxes still apply to all your overtime pay, and from 2026 you can deduct only what your employer reports in box 12, code TT of your W-2.
Your tax return
From box 12, code TT of their W-2. Leave it empty if they had none.
Optional. Over $150,000 ($300,000 jointly), the deduction falls by $100 for each full $1,000.
No tax on overtime: how the deduction works
The deduction for qualified overtime compensation lets you subtract overtime pay from your federal taxable income for 2025 through 2028, whether or not you itemize. It's a deduction, not tax-free pay: your employer still withholds as usual, and Social Security, Medicare and most state taxes still apply.
Only the premium the Fair Labor Standards Act requires counts: the extra half of time and a half. At $20 an hour, 10 overtime hours pay $300, and $100 of it qualifies. Double time doesn't count double: for the same hours paid at $400, still only $100 qualifies (IRS questions and answers). Overtime that only a state law or a union contract requires, such as daily overtime, doesn't count.
You can deduct up to $12,500 a year, or $25,000 on a joint return. Over $150,000 of modified adjusted gross income ($300,000 jointly), that limit falls by $100 for each full $1,000, so it's gone at $275,000 ($550,000 jointly). You need a Social Security number valid for work, and married couples must file jointly.
From 2026, your employer reports qualified overtime in box 12 of your W-2 with code TT, and you claim the deduction on Schedule 1-A. You can deduct only what's reported there, so if it's wrong, ask your employer for a corrected W-2c. For 2025, W-2s didn't have to show it, and you could work it out from your pay stubs.
For example, you earn $25 an hour and work 50-hour weeks for 26 weeks of the year. Each of those weeks pays $375 of overtime, and $125 of it qualifies. Over the year that's $3,250, so in the 22% bracket you save about $715 in federal income tax.
To work out the overtime pay itself, with salaries, bonuses and double time, use the overtime calculator.
No tax on overtime questions
Is double time tax free?
No. Only the half the federal law requires counts toward the no tax on overtime deduction, even when you're paid double. For 10 hours at $20 an hour paid at double time, you get $400 and $100 qualifies.
Do salaried employees get no tax on overtime?
Only if the Fair Labor Standards Act requires their overtime. Non-exempt salaried workers who are paid overtime can deduct the extra half. Exempt employees aren't owed overtime by law, so extra pay for long weeks doesn't qualify.
Do I still pay Social Security and Medicare on overtime?
Yes. The deduction lowers only federal income tax. Social Security and Medicare (7.65%) and most state income taxes still apply to all your overtime pay.
When does no tax on overtime end?
It covers tax years 2025 through 2028. Overtime paid in 2029 or later doesn't qualify unless Congress extends it.