Married filing separately cannot claim this deduction at all
Modified adjusted gross income, before this deduction
The FLSA half-time premium only, not the full overtime wage
Where do I find this on my pay records?
Overtime deduction
$0
Estimate for reference only, not verified proof — check the sources below, and their access date, before relying on this for a claim or filing.
- Statutory cap for this filing status
- $0
- Estimated tax savings
- $0
- Deduction reaches $0 at this MAGI
- —
Available only for tax years 2025 through 2028 — this deduction expires after that unless Congress extends it.
No tax on overtime calculator
Work out your federal deduction on overtime pay for 2025–2028, and where the income limit starts shrinking it.
The 2025 tax law lets you deduct the "half" premium of time-and-a-half overtime pay — up to $12,500 a year ($25,000 married filing jointly) — from federal income tax through 2028. The deduction shrinks by $100 for every $1,000 your MAGI is over $150,000 ($300,000 joint), reaching $0 at $275,000 (single) or $550,000 (joint). Married filing separately cannot claim it at any income.
Reviewed by RuleCost Editorial Team. Rules for 2026, updated 18 Sept 2026.
How to use it
- 1Choose your filing status. Married filing separately gets nothing from this deduction at any income — the law requires a joint return.
- 2Enter your expected MAGI for the year, before this deduction.
- 3Enter your qualified overtime pay — only the extra "half" of time-and-a-half, not the full overtime wage. Your W-2 reports this separately (Box 12, code TT from 2026 onward; some employers used Box 14 for 2025).
- 4Read the deduction and the estimated federal tax it saves, plus the exact MAGI where it would run out entirely.
How this calculator works
The deduction is worked out in two steps.
The cap for your filing status. $12,500 for single/head-of-household filers, $25,000 for married filing jointly. Filing separately gets $0, full stop — the statute requires a joint return.
The phase-out. Above $150,000 of MAGI (single) or $300,000 (joint), the cap drops $100 for every $1,000 of MAGI past the threshold, rounded down to the nearest $1,000. It’s a step function: $150,999 of MAGI costs nothing, $151,000 costs $100 of the cap.
Your actual deduction is the smaller of that phased cap and the overtime premium you actually earned — earning less than the cap allows doesn’t lose you anything, and earning more doesn’t get you above the cap.
A worked example
Single filer, no other adjustments.
| MAGI | Overtime premium earned | Deduction | Estimated tax saved |
|---|---|---|---|
| $60,000 | $3,000 | $3,000 | $360 |
| $150,000 | $3,000 | $3,000 | $720 |
| $200,000 | $8,000 | $7,500 (capped by phase-out) | $1,800 |
| $280,000 | $3,000 | $0 (fully phased out) | $0 |
At $200,000 the phase-out has already cut the $12,500 cap down to $7,500, so $500 of the $8,000 earned gets no deduction at all — taxed exactly as if the deduction didn’t exist.
Where the deduction disappears entirely
| Filing status | Cap | Fully phased out at |
|---|---|---|
| Single / head of household | $12,500 | $275,000 MAGI |
| Married filing jointly | $25,000 | $550,000 MAGI |
| Married filing separately | $0 | Any income |
Finding your qualified overtime pay
Starting with tax year 2026, employers must report the year’s qualified overtime compensation separately in Box 12 of Form W-2, using code TT. For tax year 2025, reporting this separately wasn’t mandatory — some employers used Box 14 instead, often labelled “Qualified overtime” or similar. If neither box has a figure, your pay stubs’ overtime line usually breaks out the premium portion, or your payroll department can confirm it.
Questions
- What counts as "qualified overtime compensation"?
- Only the premium portion required by Section 7 of the Fair Labor Standards Act — the extra half you're paid on top of your regular rate. If your regular rate is $30/hour and overtime pays $45/hour, the qualified amount is the $15/hour premium, not the full $45. Overtime paid under a union contract or state law that exceeds what FLSA requires isn't qualified.
- How much can I actually deduct?
- Up to $12,500 a year if you're single, head of household or a qualifying surviving spouse; up to $25,000 if married filing jointly. Above $150,000 of MAGI (single) or $300,000 (joint), the cap drops by $100 for every $1,000 over — a step, not a smooth taper, so $999 over costs nothing but the next dollar drops it by $100.
- At what income does the deduction disappear completely?
- $275,000 of MAGI for a single filer, $550,000 for a married couple filing jointly — the exact point where the $100-per-$1,000 reduction has eaten the entire cap.
- Why can't I claim this if I file separately from my spouse?
- The law states plainly that the deduction applies "only if the taxpayer and the taxpayer's spouse file a joint return." There's no reduced version for separate filers — it's zero at any income.
- Is this a real deduction or just less withholding?
- It's a deduction claimed on your tax return (new Schedule 1-A), available whether or not you itemize. Your paycheck withholding doesn't automatically account for it, so the saving shows up when you file rather than in each paycheck — unless you adjust your W-4.