No Tax on Overtime Calculator

What does "FLSA overtime hours per week" mean?

Only overtime required under section 7 of the Fair Labor Standards Act qualifies — that's the federal weekly 40-hour rule. Enter the hours you typically work over 40 per workweek. State daily overtime (California 8h, Alaska 8h, Colorado 12h), double-time, the 7th-consecutive-day premium, CBA premiums, and employer-policy overtime paid to FLSA-exempt employees do not qualify under IRC § 225(c).

Source: 26 U.S.C. § 225

Why is only the 0.5x premium deductible, not the full 1.5x overtime check?

IRC § 225(c) limits qualified overtime compensation to overtime "in excess of the regular rate." On time-and-a-half pay, the 1.0x portion is the regular rate (already taxable normally); only the additional 0.5x premium is what § 225(c) deducts. On an employee earning $20/hr regular and $30/hr OT, only the $10/hr premium is deductible — not the full $30.

Does the calculator factor in state income tax?

No — this is a federal-only estimate. State income-tax treatment depends on the state return's starting point. For overtime, Oregon, Idaho, North Dakota, and South Carolina are the main states where the federal deduction currently lowers state taxable income. Most states either start from federal AGI, use their own tax base, have no wage income tax, or have added the deduction back.

How is the marginal rate computed?

The calculator approximates taxable income as MAGI minus the 2026 standard deduction ($16,100 single / $32,200 joint) and looks up the bracket from IRS Rev. Proc. 2025-32. For most workers this is within a couple of percent of the actual rate from a fully-prepared 1040. The bracket used is the marginal rate at that taxable income, which is what applies to the last dollar of the QOC deduction.

Source: IRS Rev. Proc. 2025-32 (2026 brackets)

What is the W-2 Box 12 code TT amount and why might it differ from my deduction?

Box 12 code TT is the total qualified overtime compensation your employer must report on your 2026 W-2 (issued January 2027) — that's the full annual FLSA-premium amount, uncapped. Your deduction on your 1040, by contrast, is capped at $12,500 single / $25,000 joint and phased out by MAGI. So the Box 12 number can exceed what you actually deduct. Box 12 is reporting; the deduction is what shows up on Schedule 1-A.

Source: PayrollOrg — IRS releases 2026 Form W-2 with OBBBA changes

Does this work for tax year 2025?

The math works the same — the deduction is retroactive to tax years beginning January 1, 2025. The differences are reporting (2025 W-2s have no mandatory Box 12 entry; employers may voluntarily disclose in Box 14 per IRS Notice 2025-69), and that you claim it on your 2025 Schedule 1-A in January 2026 rather than 2026 / January 2027.

Does the deduction stack with "No Tax on Tips"?

Yes — OBBB Section 70201 created a parallel deduction for qualified tip income (new IRC § 224), capped at $25,000 with the same MAGI phase-out. Tipped employees in qualifying occupations can claim both § 225 (overtime premium) and § 224 (tips), subject to each one's separate cap. Tips show on W-2 Box 12 code TP; overtime on code TT. Two boxes; two deductions; same phase-out income.

When does this sunset?

IRC § 225(g) terminates the deduction for tax years beginning after December 31, 2028. Four tax years available: 2025, 2026, 2027, 2028. Absent a Congressional extension, qualified overtime becomes ordinary taxable income again starting tax year 2029.