Punch Clock MathHours, overtime and every state’s rules

Overtime & pay rules · calculator

No tax on overtime calculator

Overtime isn’t tax-free: for 2025–2028 you can deduct the extra half of time and a half from your federal taxable income. Nothing you type leaves your browser.

Tax year
2026
Filing status
Single
Overtime from
My regular rate and my overtime hours
Regular rate
$22
FLSA overtime hours
300
MAGI
$58,000
FLSA non-exempt · valid SSN
yes · yes

Your overtime and your return

Example
Deduction $3,300about $396 less federal income tax2026 · singleFull result
Tax year
How do you know your overtime?

With a bonus or two rates, use the regular rate.

hours

Only hours over 40 in a workweek, added up for the year (6 a week for 50 weeks = 300). 7:45 or 7.75 both work.

From 2026 on, you can’t deduct more than the amount your employer puts in W-2 box 12, code TT. Use this to check that number.

An estimate is fine. For most people it’s the adjusted gross income on the tax return.

What’s MAGI?

Your adjusted gross income (AGI): your total income minus a few adjustments, before the standard deduction. For this deduction it is “modified” only if you excluded foreign earned income or income from Puerto Rico or a U.S. territory — add that back. Most workers can use their AGI.

IRS rule: MAGI = AGI increased by amounts excluded under IRC 911 (foreign earned income/housing), 931 (Guam/American Samoa/CNMI) or 933 (Puerto Rico). Schedule 1-A Part I: Form 1040 line 11b + excluded Puerto Rico income + Form 2555 lines 45 and 50 + Form 4563 line 15.

Who can take it

Your estimate

Tax year 2026 · Single

Estimated deduction

$3,300

About $396 less federal income tax if your top rate is 12%.

Estimated deduction $3,300, about $396 less federal income tax.

RuleFederal — deduct the FLSA overtime premium, up to $12,500 ($25,000 joint), less $100 for each full $1,000 of MAGI over $150,000 ($300,000 joint), tax years 2025–2028Sources checked How the math works ↓

Where the number comes from

  1. The part that counts: the FLSA overtime premium300:00 FLSA overtime hours (300.00 h) × half of $22.00$3,300
  2. The smaller of the premium and the cap for a single filerCap $12,500 per return ($25,000 on a joint return) — Schedule 1-A line 15$3,300
  3. The income phase-outMAGI $58,000 isn’t over $150,000, so nothing comes off$0
  4. Your deduction$3,300, nothing comes off — Schedule 1-A line 21$3,300

How the tax figure is estimated. Taxable income before the deduction: $41,900, taxed at 12% on its top dollars. With $3,300 less taxable income, federal income tax goes down by $396.

  • MAGI is the same as AGI.
  • The 2026 standard deduction for a single filer: $16,100; no itemizing, no other deductions or credits.
  • 2026 federal brackets; federal income tax only.

Only the extra half counts

  1. Your overtime pay at time and a half$9,900

    • $6,600the 1.0 part — doesn’t count
    • $3,300the extra half — counts
Time and a half is two parts: the straight-time pay every hour earns (the 1.0) and the premium on top (the 0.5). Only the premium is deductible.

The cap and the phase-out

  1. Your premium$3,300

    • $3,300deductible

  2. Capped premium for a single filer$3,300

    • $3,300your deduction (the premium that counts)
First the premium is capped at $12,500; then $100 comes off for each full $1,000 of MAGI over $150,000, never below $0 (Schedule 1-A lines 15–21). With a full-cap premium the deduction reaches $0 at $275,000.

What doesn’t count

  • Overtime only your state requires. Daily overtime (over 8 hours in a day, for example) counts only for hours that were also over 40 in the workweek, because only overtime the federal FLSA requires counts.
  • The 1.0 part of each overtime hour. Only the extra half of time and a half — for double time, only the FLSA half.
  • Overtime from a contract or company policy beyond what the FLSA requires, such as weekend or holiday premiums.
  • Social Security and Medicare (FICA). They are still taken out of all your overtime pay.
  • State income tax. This is a federal deduction; your state follows its own law.
  • Married filing separately. That status gets $0. You also need a Social Security number valid for employment.

Where the number comes from on paper

2026: W-2 code TT

From tax year 2026, employers report qualified overtime in box 12 of your W-2 with code TT (box 1d of a 1099-NEC if you were paid as a contractor). You can’t deduct more than that amount.

If the code TT amount looks too low, ask your employer for a corrected W-2 (a W-2c). A substitute form (Form 4852) isn’t accepted for this.

Calculated with Punch Clock Math · rules checked October 22, 2026 · an estimate, not legal or tax advice · punchclockmath.com

How the math works

Five steps, shown with the example (single, $22.00 an hour, 300 FLSA overtime hours, MAGI $58,000, tax year 2026).

  1. Find the premium the FLSA requiresHalf the regular rate for each hour over 40 in a workweek: 300 h × $11.00 = $3,300.00. Each workweek stands alone; overtime owed only under a state rule, a contract or a policy is left out.Pay stubs work too: the premium as shown, all time-and-a-half overtime pay ÷ 3, or double-time pay ÷ 4.Public Law 119-21 (One Big Beautiful Bill Act), sec. 70202 No Tax on Overtime, 139 Stat. 174-176 · FS-2026-01 (Jan. 2026), Questions and answers about the new deduction for qualified overtime compensation (superseded by FS-2026-13) · FS-2026-13 (Aug. 2026), Updates to questions and answers about the new deduction for qualified overtime compensation · Notice 2025-69, Guidance for Individual Taxpayers who received Qualified Tips or Qualified Overtime Compensation in 2025
  2. Apply the cap$12,500 per return, $25,000 on a joint return for both spouses together. $3,300.00 is under $12,500.Public Law 119-21 (One Big Beautiful Bill Act), sec. 70202 No Tax on Overtime, 139 Stat. 174-176 · Schedule 1-A (Form 1040) 2025, Additional Deductions · 2025 Instructions for Form 1040 (Schedule 1-A, Part III instructions, pp. 106-108) · FS-2026-13 (Aug. 2026), Updates to questions and answers about the new deduction for qualified overtime compensation
  3. Reduce it above the income line$100 off for each full $1,000 of MAGI over $150,000 ($300,000 joint); a part of a $1,000 takes nothing off. MAGI $58,000 is under the line. At MAGI $160,500 a premium capped at $12,500 would lose 10 × $100 = $1,000, leaving $11,500 (Schedule 1-A line 21 = line 15 − line 20).Public Law 119-21 (One Big Beautiful Bill Act), sec. 70202 No Tax on Overtime, 139 Stat. 174-176 · Schedule 1-A (Form 1040) 2025, Additional Deductions
  4. Take off the reductionThe deduction is the capped premium minus the reduction, never below $0: $3,300.00. Married filing separately gets $0, and so does a worker without a Social Security number valid for employment.Public Law 119-21 (One Big Beautiful Bill Act), sec. 70202 No Tax on Overtime, 139 Stat. 174-176 · FS-2026-13 (Aug. 2026), Updates to questions and answers about the new deduction for qualified overtime compensation · Schedule 1-A (Form 1040) 2025, Additional Deductions · 2025 Instructions for Form 1040 (Schedule 1-A, Part III instructions, pp. 106-108)
  5. Estimate the tax it savesTaxable income = MAGI − the standard deduction = $41,900. Federal income tax on it, minus the tax on $38,600, = $396.00 (its top rate is 12%).Assumes MAGI = AGI, the standard deduction and no other deductions or credits. Brackets 2025 and 2026 are in our data (read October 22, 2026); for later years the newest brackets are used and the result says so.Rev. Proc. 2024-40 sec. 2.01, Tables 1-4 · Rev. Proc. 2025-32 sec. 4.01, Tables 1-4 · Public Law 119-21 (One Big Beautiful Bill Act), sec. 70202 No Tax on Overtime, 139 Stat. 174-176 · 2025 Instructions for Form 1040 (Schedule 1-A, Part III instructions, pp. 106-108)

What this doesn’t cover

  • Your actual return: other deductions, credits, other income, itemizing and the alternative minimum tax change the tax figure. The deduction itself does not depend on them.
  • Several employers or a 1099: add the premiums yourself; the IRS instructions have worksheets for more than one employer or payer.
  • Public-sector and special overtime systems: police and fire 7(k) schedules, 7(j) hospital schedules and other alternative FLSA rules need the employer’s figure (W-2 code TT from 2026).
  • Bonuses and two rates: the premium uses the regular rate, which includes nondiscretionary bonuses and differentials. Work it out in the regular rate calculator, then use “my regular rate and my overtime hours”.
  • State income tax: each state decides whether to follow this federal deduction; not modeled.
  • 2027 and 2028 brackets: not published yet (checked October 22, 2026); the tax figure uses the newest brackets in our data and says so.

Page sources

Every rule above comes from these pages, read on the dates shown.

  1. Public Law 119-21 (One Big Beautiful Bill Act), sec. 70202 No Tax on Overtime, 139 Stat. 174-176U.S. Government Publishing Office (govinfo) · read
  2. Schedule 1-A (Form 1040) 2025, Additional DeductionsIRS · read
  3. 2025 Instructions for Form 1040 (Schedule 1-A, Part III instructions, pp. 106-108)IRS · read
  4. FS-2026-13 (Aug. 2026), Updates to questions and answers about the new deduction for qualified overtime compensationIRS · read
  5. FS-2026-01 (Jan. 2026), Questions and answers about the new deduction for qualified overtime compensation (superseded by FS-2026-13)IRS · read
  6. Notice 2025-69, Guidance for Individual Taxpayers who received Qualified Tips or Qualified Overtime Compensation in 2025IRS · read
  7. 2026 General Instructions for Forms W-2 and W-3IRS · read
  8. Notice 2025-62, Relief from Certain Penalties Related to Information Reporting Required in Connection with No Tax on Tips and OvertimeIRS · read
  9. Rev. Proc. 2024-40 sec. 2.01, Tables 1-4Internal Revenue Service · read
  10. Rev. Proc. 2025-32 sec. 4.01, Tables 1-4Internal Revenue Service · read