2026 federal deduction · IRS updated August 6, 2026

No Tax on Overtime Calculator (2026)

Estimate the federal deduction and tax savings without treating the entire overtime check as tax-free. The calculator separates total overtime wages from the FLSA premium that may qualify.

Start with the part that may qualify

The deduction does not make all overtime pay tax-free. For ordinary time-and-a-half, the potentially qualified FLSA premium is generally the extra 0.5× portion—not the full 1.5× overtime wage.

Your overtime dollar, separated
1.0×regular portion 0.5×possible qualified premium

Your 2026 estimate

Overtime and tax details

Inputs stay local
Overtime schedule
Use only hours that may be required under the FLSA.
Pay above the required FLSA premium may not qualify.
Eligibility checkpoint

Choose based on why the overtime was paid. State-law, union or employer-only overtime is not automatically qualified.

Qualified premium source
Federal deduction estimate
Married taxpayers must file jointly to claim this deduction.
Line 1b uses total income, which can differ from MAGI.
Used only to estimate tax savings, not eligibility.

Federal planning estimate only. It does not determine FLSA eligibility, state tax treatment or your final return.

Rule set verified September 2, 2026

Cross-checked against IRS FS-2026-13, the IRS qualified-overtime Q&A, 2026 Publication 15-T and 2026 Form W-4. Calculations run in your browser and are not sent to PaycheckForge.

Read before changing payroll

What qualifies—and what never became “tax-free”

The deduction, W-4 withholding adjustment and W-2 reporting rule are three different things. The plain-English guide connects them without double-counting the benefit.

Read the 2026 guide

What this calculator does

1. Separates overtime wages from the premium

At time-and-a-half, an overtime hour contains the regular 1.0× wage plus an extra 0.5× premium. The calculator shows total overtime pay for context, then estimates the potentially qualified premium from eligible hours. If your employer has supplied a 2026 W-2 or equivalent payroll record, you can use the Box 12 Code TT amount instead.

2. Applies the cap and MAGI phaseout

The starting deduction cap is $12,500 for an individual return and $25,000 for married filing jointly. Above $150,000 or $300,000 of modified adjusted gross income, respectively, the available cap falls by $100 for each complete $1,000 above the threshold. Both the cap and final deduction are clamped at zero.

3. Keeps tax savings separate from withholding timing

The estimated tax benefit is the allowed deduction multiplied by the marginal federal income-tax rate you select. That annual benefit may appear through lower paycheck withholding after payroll receives a valid updated W-4, or when you claim the deduction on the federal return. Those are two timings for the same benefit, not two benefits to add together.

For the 2026 W-4, taxpayers below $150,000 of total income—or $300,000 when filing jointly—may estimate qualified overtime on Deductions Worksheet line 1b. Step 4(b) is the worksheet line 15 total after other deductions are included; it is not the overtime deduction by itself. At or above those income levels, follow the W-4 instructions or use the IRS Tax Withholding Estimator.

Important limits

  • This tool does not decide whether an employee or payment is covered by the FLSA.
  • State income-tax treatment and state-only overtime rules are not modeled.
  • Social Security and Medicare taxes still apply to overtime wages.
  • The per-paycheck figure is a full-year planning estimate; actual withholding follows the W-4 and the employer's Publication 15-T payroll method.

Frequently asked questions

Is all of my overtime pay tax-free in 2026?

No. This is a federal income-tax deduction for qualified overtime compensation. For ordinary time-and-a-half, the potentially qualified amount is generally the extra 0.5× FLSA premium, not the full 1.5× overtime wage. The result is also limited by an annual cap and a MAGI phaseout.

Does the overtime deduction remove Social Security and Medicare tax?

No. Qualified overtime remains subject to Social Security and Medicare taxes. The deduction can reduce federal income-tax liability; it does not turn overtime wages into payroll-tax-free income.

Will my employer automatically withhold less federal income tax?

No. The deduction does not automatically change paycheck withholding. When total income is below the W-4 threshold, qualified overtime is estimated on Deductions Worksheet line 1b; Step 4(b) receives the worksheet line 15 total after other deductions are included. At or above the threshold, use the IRS Tax Withholding Estimator or follow the form instructions.

What is W-2 Box 12 Code TT?

Beginning with 2026 reporting, employers use W-2 Box 12 Code TT to separately report qualified overtime compensation. That amount is a stronger starting point than estimating the premium from hours when the form or an equivalent payroll record is available.

How does the MAGI phaseout work?

The $12,500 individual or $25,000 joint cap is reduced by $100 for each complete $1,000 of modified adjusted gross income above $150,000 for an individual return or $300,000 for a joint return. The calculator never allows the resulting cap or deduction to fall below zero.

Official IRS sources

Retrieved and reviewed September 2, 2026. Estimates are for planning only—not tax, legal or financial advice.