Qualified Overtime Deduction: What It Changes on the Return, Not on the Check

What the fact sheet sets

FS-2026-13 describes the deduction for qualified overtime compensation for tax year 2026. The deduction is capped at $12,500 for an individual filer and $25,000 for a joint return, and it phases out above $150,000 of modified adjusted gross income for an individual and $300,000 on a joint return.

The fact sheet also covers how qualifying amounts are identified and reported. Eligibility depends on individual facts, and the linked document is the source of record.

What it means for your paycheck

A deduction taken on a return is not the same thing as an exemption from withholding. Overtime pay generally still increases taxable wages during the year, and the benefit of the deduction usually appears when the return is filed — unless a Form W-4 change is made deliberately.

The figure on this card is deliberately narrow: it is the estimated difference in take-home between working the overtime and not working it, under ordinary withholding, computed by the same engine that runs our calculators. It is not an estimate of the deduction itself.

How PaycheckForge uses it

The No Tax on Overtime Calculator models the federal deduction, its cap and its phase-out separately from the paycheck estimate, and it states what it does not model: FLSA eligibility, state conformity and an employer’s payroll implementation.

Source and scope

Primary sources: IRS FS-2026-13 and the IRS qualified-overtime questions and answers. Sources checked September 2, 2026. Figures are estimates; eligibility for the deduction depends on individual facts and official rules, and this is not tax advice.