This calculator is current for tax year 2026. The federal bracket and standard-deduction values match IRS Rev. Proc. 2025-32 / IR-2025-103, including the OBBB adjustments: $16,100 standard deduction for single filers, $32,200 for joint filers, 12% brackets beginning at $12,400 / $24,800, and top 37% brackets beginning at $640,600 / $768,700. The § 225 cap, MAGI phase-out, FLSA-premium calculation, and W-2 Box 12 code TT reporting logic match the statute and IRS transition guidance. The calculator intentionally estimates federal income-tax savings only; state treatment is left out because it depends on state-specific tax-base design and current state guidance.
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2026 single-filer tax brackets — 10% / 12% / 22% / 24% / 32% / 35% / 37% with lower bounds $0 / $12,400 / $50,400 / $105,700 / $201,775 / $256,225 / $640,600
2026 joint-filer tax brackets — 10% / 12% / 22% / 24% / 32% / 35% / 37% with lower bounds $0 / $24,800 / $100,800 / $211,400 / $403,550 / $512,450 / $768,700
2026 standard deductions — $16,100 single, $32,200 joint
§ 225(b)(1) cap — $12,500 single, $25,000 joint
§ 225(b)(2) phase-out thresholds — $150,000 single, $300,000 joint
§ 225(b)(2) phase-out rate — 10% of MAGI excess (i.e., $100 per $1,000)
FLSA-premium multiplier — 0.5× of regular hourly rate
§ 225(c) reads, in relevant part, "the amount of overtime compensation paid in excess of the regular rate of compensation" — confirming that only the 0.5× premium portion (not the underlying 1.0× regular-rate hours) qualifies. Cross-checked against the FLSA § 207 requirement of "not less than one and one-half times the regular rate."
W-2 Box 12 code TT amount — the full uncapped annual qualifying premium (NOT the capped deduction)
Box 12 reports the full qualifying premium; the deduction cap applies on the employee's 1040. The distinction matters for payroll teams and is surfaced as two separate output cards in the tool.
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IRC § 225 was enacted by Section 70202(a) of Public Law 119-21 (the "One Big Beautiful Bill Act")
IRC § 225(c) — "qualified overtime compensation" means overtime compensation paid in excess of the regular rate, as required under FLSA § 7
State daily overtime (CA / Alaska / Colorado / etc.), double-time, 7th-consecutive-day premium, CBA premiums, and exempt-employee policy overtime do NOT qualify under § 225(c)
Married filers must file jointly to claim § 225 — married-filing-separately is disqualified
§ 225(g) terminates the deduction for tax years beginning after December 31, 2028
2025 tax year — § 225 is retroactive to tax years beginning January 1, 2025, but W-2 Box 12 code TT reporting is NOT mandatory for 2025 (per IRS Notice 2025-69 transition relief; employers may voluntarily disclose in Box 14)
2026 W-2 Box 12 code TT is MANDATORY (the IRS finalized the 2026 W-2 with the new code on January 12, 2026)
PayrollOrg is a Tier-2 industry source citing IRS-issuing-body action; acceptable for the date-stamp confirmation. The substantive mandate is grounded in Tier-1 Notice 2025-69.
§ 225 is claimed on Schedule 1-A and reduces taxable income, not AGI
The deduction is available whether the taxpayer takes the standard deduction or itemizes, but it does not reduce AGI or MAGI. That distinction is why most AGI-starting states do not automatically pick it up.
OBBB Section 70201 created a parallel deduction for qualified tip income at new IRC § 224 (capped at $25,000, same MAGI phase-out, W-2 Box 12 code TP)
29 CFR §§ 778.107–.122 govern the FLSA "regular rate of pay" weighted-average calculation for multi-rate workers (shift differentials, non-discretionary bonuses, piece-rate, commissions)
The tool correctly excludes multi-rate workers from its scope and surfaces the limitation in the methodology page's "What's not modeled" section.
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9 states have no state income tax (so § 225 has no state-conformity implications for them)
New Hampshire's interest-and-dividends tax was phased out in 2025, completing the move to a full no-income-tax posture on wages.
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the calculator excludes state income tax because § 225 state treatment depends on each state's tax-base starting point and current guidance
This is why a federal-only calculator is the safer user promise. A state calculator would need state residence/work-state inputs and a dated state-law table.
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2026 tax brackets and standard deductions are current AS OF this verification date
§ 225 deduction is in effect for tax years 2025–2028 (4 tax years)
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