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Qualified overtime deduction calculator

Apply the federal $12,500 or $25,000 cap and the income phaseout to your reported qualified overtime.

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Tax-year details

Required

For 2026, add Form W-2 box 12 code TT from every employer, plus any Form 1099 amount. Enter the full reported total; the cap is applied below.

Adjusted gross income from Form 1040, plus any excluded foreign, Puerto Rico, or US possession income.

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RESULT

Enter your filing status, reported qualified overtime, and MAGI to see the deduction after the cap and phaseout.

How the qualified overtime deduction works

For tax years 2025 through 2028, eligible workers can deduct qualified overtime compensation from taxable income (Public Law 119-21, section 70202, which adds IRC section 225). The deduction is available with the standard deduction or itemized deductions. It does not reduce adjusted gross income.

  1. Add the qualified overtime reported to you. For 2026 and later, this is Form W-2 box 12 code TT, or the overtime box on Form 1099.
  2. Limit the total to $12,500, or $25,000 on a joint return. The joint cap is for both spouses together.
  3. If MAGI is above $150,000 ($300,000 joint), count the full $1,000 steps above that amount. Partial thousands do not count.
  4. Subtract $100 for each step. The deduction cannot go below zero.
SINGLE / $10,000 QUALIFIED OVERTIME / $160,500 MAGI$10,000 − $1,000 = $9,000

MAGI is $10,500 above $150,000. That is 10 full $1,000 steps, so the reduction is 10 × $100 = $1,000. A full $12,500 deduction is gone at $275,000 MAGI; a full $25,000 joint deduction is gone at $550,000.

What counts as qualified overtime?

Only the part of FLSA-required overtime pay above the regular rate counts: usually the half in time and a half. For a standard week it is hours above 40 × ½ × the FLSA regular rate. The worker must be covered by the FLSA and not exempt from its overtime rules. Overtime paid only because of state law, a union contract, or employer policy is not qualified. That includes California daily overtime when the week is 40 hours or less. If an employer pays double time, only the FLSA-required half-time part counts. The IRS example: 10 overtime hours at $20 paid at double time is $200 in premium, but only $100 is qualified (IRS FS-2026-13, Q16).

Which amount do I enter?

For 2026 and later, employers must report qualified overtime on Form W-2 box 12 code TT. The IRS says you may not deduct more than the reported amount unless the employer issues a corrected Form W-2c, and you may not use more than was actually paid (FS-2026-13, Q20–Q22). For 2025, employers were not required to report it separately; Notice 2025-69 allows reasonable methods, such as one-third of a total time-and-a-half overtime amount.

Does this change my paycheck?

Not automatically. Overtime stays subject to income-tax withholding, Social Security, and Medicare. An employer can lower withholding only if you give it a new Form W-4 that includes the expected deduction in Step 4(b) (FS-2026-13, Q8–Q9). Use the paycheck calculator with that Step 4(b) amount to see the withholding effect.

Limits of this calculator

This tool applies the statutory cap and phaseout to the amounts you enter. It does not decide FLSA coverage or exemption, check your W-2, calculate MAGI, or apply state tax rules. Married taxpayers must file jointly to claim the deduction. The 2026 Schedule 1-A line numbers were not checked; the steps follow the statute and the 2025 Schedule 1-A, Part III. Sources checked . The FS-2026-13 answers are IRS guidance, not published rulings.

Estimate weekly overtime under California rules · Read the 0.5× vs 1.5× paycheck guide