Quick answer. For tax years 2025 through 2028 you can deduct the FLSA overtime premium, up to $12,500 ($25,000 married filing jointly), reduced by $100 for each full $1,000 of modified AGI over $150,000 ($300,000 joint). Example: $15,000 of time-and-a-half overtime pay holds a premium of $5,000.
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Only the premium counts
The IRS fact sheet FS-2026-13 defines qualified overtime compensation as the overtime the FLSA requires (29 U.S.C. 207) that is more than the employee's regular rate. Its basic formula is hours over 40 in the workweek, times one-half, times the regular rate. A workweek is a fixed, recurring 168-hour period, and hours can't be averaged across weeks.
Examples from IR-2025-114 (Notice 2025-69) and FS-2026-13, question 16.
Cap, phase-out and reporting
- Years: 2025 through 2028.
- Cap: $12,500 per return, or $25,000 on a joint return.
- Phase-out: above $150,000 of modified AGI ($300,000 joint). Schedule 1-A (2025), lines 16 to 21, takes $100 off for each full $1,000 over and rounds any fraction down.
- Who: a valid Social Security number on the return, and a joint return if married. Itemizing isn't required.
- Reporting: for 2026 and later, Form W-2 box 12 code TT. If it's too low, the IRS says you need a corrected Form W-2c to use the higher amount; a substitute Form 4852 can't support the deduction (FS-2026-13, questions 22 and 23).
Sources
- IRS: One, Big, Beautiful Bill provisions, individuals and workers (updated Aug. 27, 2026)
- IRS FS-2026-13: questions and answers on the qualified overtime compensation deduction (August 2026)
- IRS IR-2025-114: guidance for individuals who received tips or overtime in 2025 (Notice 2025-69)
- IRS: Schedule 1-A (Form 1040), Additional Deductions, 2025
- IRS: General Instructions for Forms W-2 and W-3 (2026)
- IRS: Form 1040 instructions, including Schedule 1-A
General information checked November 2026 against the IRS sources above. It is not tax advice, and it does not tell you whether you qualify: your return, your forms and your preparer decide that. MCC Solutions is not a CPA firm and is not affiliated with the IRS. Whether you are covered by the FLSA overtime rules is a question for your employer or the Department of Labor. The calculator runs in your browser, and nothing you enter is sent or saved.
Common questions
Is all my overtime pay deductible?
No. Only the premium part that the Fair Labor Standards Act requires counts: the half in time-and-a-half. The straight-time part of overtime hours stays taxable as usual.
What if my employer pays double time?
Only the part the FLSA requires counts. The IRS example: $400 of double-time pay where the FLSA required $300 has $100 of qualified overtime. For 2025 the IRS also allowed dividing total double-time pay by four.
Where will I see qualified overtime on my W-2?
For tax year 2026 and later, employers report it in Form W-2 box 12 with code TT. For 2025 they did not have to report it separately, so the IRS allowed pay stubs and employer statements instead.
Does overtime under a state law or union contract count?
Not automatically. The IRS FAQs say only overtime the FLSA requires is qualified. An employee the FLSA treats as exempt has none, even if a contract or state law pays overtime.
Does the deduction lower Social Security and Medicare tax?
No. The IRS says it does not change withholding or Social Security, Medicare or federal unemployment tax on the pay. It is an income tax deduction on Schedule 1-A.
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