Overtime Tax Deduction Calculator
Estimate the deduction for an established qualified overtime premium. Ordinary overtime wages and payroll taxes are not exempted by this calculation.
Rule year: 2026 · USD · Sources checked
Estimated qualifying federal deduction
Eligible FLSA premium and reporting are already established; valid identification and filing conditions apply. No state deduction assumption, payroll-tax exemption, credit interaction, AMT or other-income reconstruction. Enter ordinary taxable income before this deduction separately from the deduction-specific MAGI.
For informational purposes only. This estimate is not financial advice, a tax return, a payroll calculation or a lender decision. See the supported circumstances and exclusions below.
How this calculator works
The qualified-overtime deduction covers the eligible FLSA premium above the regular rate, not every dollar earned during overtime hours. The cap is $12,500, or $25,000 on a joint return. The deduction is reduced by $100 for each complete $1,000 of MAGI above $150,000, or $300,000 jointly. Married filing separately is ineligible. The tax-reduction row compares ordinary federal bracket tax before and after the deduction against your entered taxable income; it does not alter FICA withholding.
Formula and rules
Deduction = max(0, min(qualified premium, filing-status cap) − $100 × floor(max(0, MAGI − phase-out start) / $1,000)). Tax reduction = ordinary tax before − ordinary tax after deduction.
Assumptions and limitations
Eligible FLSA premium and reporting are already established; valid identification and filing conditions apply. No state deduction assumption, payroll-tax exemption, credit interaction, AMT or other-income reconstruction. Enter ordinary taxable income before this deduction separately from the deduction-specific MAGI.
Worked example
A single filer with $5,000 qualified premium, $80,000 MAGI and $63,900 ordinary taxable income can illustrate a $5,000 deduction. Both affected income slices are in the 22% bracket, giving $1,100 ordinary federal tax reduction.
- Estimated qualifying federal deduction
- $5,000.00
- Ordinary-income tax reduction in entered scenario
- $1,100.00
- Qualified compensation before income phase-out
- $5,000.00
- MAGI phase-out reduction
- $0.00
Official sources and review
Reviewed against the sources below on 2026-10-06. Rates are held in versioned rule modules. Versioned rules, official source review and year-specific calculation tests.
- IRS Schedule 1-A ↗
Qualified tips and overtime deduction caps and whole-$1,000 downward rounding of MAGI phase-outs; 2025 form illustrates unchanged 2026 statutory method.
- IRS: qualified overtime questions and answers ↗
2026 FLSA-qualified overtime premium, reporting and filing-status limitations.
Common questions
Can I enter all my overtime pay?
No. Only the established qualified FLSA premium belongs here. For typical time-and-a-half pay, the eligible premium is the extra half-time portion, subject to IRS conditions.
Does the deduction remove Social Security or Medicare tax?
No. The deduction affects federal income-tax calculations; payroll taxes still apply.
How is a partial $1,000 of excess MAGI handled?
The Schedule 1-A method rounds the number of excess $1,000 units down. A $999 excess alone does not produce a $100 reduction.