# Qualified overtime deduction calculator

Source: https://payinview.com/us/qualified-overtime-deduction-calculator

## 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](https://www.congress.gov/119/plaws/publ21/PLAW-119publ21.pdf)). The deduction is available with the standard deduction or itemized deductions. It does not reduce adjusted gross income.

- 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.
- Limit the total to $12,500, or $25,000 on a joint return. The joint cap is for both spouses together.
- If MAGI is above $150,000 ($300,000 joint), count the full $1,000 steps above that amount. Partial thousands do not count.
- 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](https://www.irs.gov/pub/taxpros/fs-2026-13.pdf)).

### 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](https://www.irs.gov/pub/taxpros/fs-2026-13.pdf)). For 2025, employers were not required to report it separately; [Notice 2025-69](https://www.irs.gov/pub/irs-drop/n-25-69.pdf) 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](https://www.irs.gov/pub/taxpros/fs-2026-13.pdf)). Use the [paycheck calculator](https://payinview.com/us/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](https://www.irs.gov/pub/irs-pdf/f1040s1a.pdf). Sources checked 2026-10-26. The FS-2026-13 answers are IRS guidance, not published rulings.

[Estimate weekly overtime under California rules](https://payinview.com/us/california-overtime-calculator) · [Read the 0.5× vs 1.5× paycheck guide](https://payinview.com/us/guides/paycheck-lines)