How This Calculator Works (Methodology)
Last updated: October 2026
This page explains how the No Tax On Overtime Calculator estimates the federal qualified overtime deduction. It follows guidance from the IRS and the U.S. Department of Labor. Results are estimates, not tax advice. To check your own eligibility first, read who qualifies for the overtime tax deduction.
What the Deduction Covers
- It applies to tax years 2025 through 2028.
- Only the overtime premium required by the Fair Labor Standards Act (FLSA) qualifies. For time-and-a-half pay, that is the extra half, not the whole overtime wage.
- The annual cap is $12,500 for single filers and heads of household, and $25,000 for married couples filing jointly.
- Married people filing separately cannot claim it.
- It is a deduction below the line, so it lowers taxable income, but not AGI, and you do not need to itemize.
For the full rule set, see the complete overtime deduction guide.
How the Estimate Is Calculated
| Step | What the Calculator Does |
|---|---|
| 1 | Annual overtime hours = weekly overtime hours x weeks with overtime |
| 2 | Qualified premium = regular hourly rate x 0.5 x annual overtime hours |
| 3 | Applies the annual cap, so the deduction is the lesser of the premium or the cap |
| 4 | Reduces the deduction by $100 for every $1,000 of MAGI above $150,000 (single, head of household) or $300,000 (joint) |
| 5 | Estimated tax savings = deduction x your marginal federal tax rate |
The deduction reaches $0 at a MAGI of $275,000 for single filers and $550,000 for joint filers.
Worked Example
A single worker earns $20 per hour and works 300 overtime hours at time-and-a-half. The qualified premium is $20 x 0.5 x 300 = $3,000. That is below the cap, and a MAGI of $80,000 triggers no phase-out. At a 12% marginal rate, the estimated savings is about $360.
Phase-Out Example
A single filer has a $12,500 premium and a MAGI of $200,000. That is $50,000 over the threshold, so the reduction is 50 x $100 = $5,000. The deduction falls to $7,500.
What the Estimate Does Not Include
- State and local income tax
- Social Security and Medicare tax, which still apply to overtime pay
- Other credits, deductions, and income on your return
- Exact MAGI adjustments for your full return
Where Your Real Number Comes From
From tax year 2026, employers report qualified overtime in Box 12 of Form W-2 with code TT. Other payees may see it on Form 1099-NEC (Box 1d) or Form 1099-MISC (Box 14). Use that reported amount when you have it. For 2025, use your pay stubs and earnings statements.
Sources
- IRS: Questions and answers about the new deduction for qualified overtime compensation
- IRS Notice 2025-69
- IRS: General Instructions for Forms W-2 and W-3
- U.S. Department of Labor: Fact Sheet #23, Overtime Pay Requirements of the FLSA
Updates and Limits
Tax rules can change. We review this page when new federal guidance is released. This tool gives estimates only and is not tax, legal, or financial advice. For personal advice, speak with a qualified tax professional.
Corrections
If you find a mistake in a number, rule, or example on this site, or have a question about the method, please email support.notaxonovertime@gmail.com. We check it against the IRS and Department of Labor sources listed above. If we confirm the error, we fix it and update the “Last updated” date on the page.
Want to know who built this tool? Read the About page.