How does this overtime tax calculator estimate my deduction?

**You pick the material you have; the calculator does the math.** Enter a W-2 code TT amount, box 14, employer statement, or another qualified amount directly. For tax year 2025 only, Notice 2025-69 permits one-third, one-half, one-fourth, or confirmed-regular-rate methods from annual pay or time records. The calculator never infers FLSA status, pay type, or a regular rate; it then applies the cap, MAGI phase-out, and your marginal rate.

Does this calculator show my after-tax paycheck?

**No — it shows only a possible federal deduction and its estimated income-tax savings.** It does not calculate a full paycheck, refund, FICA, state tax, withholding, or other deductions.

How do I calculate overtime for taxes when filing my 2025 return?

**Match the method to your 2025 record.** Use a separately reported qualified amount directly; otherwise use only the matching Notice 2025-69 transition method. The reporting steps above explain which Schedule 1-A line applies to each source.

Why is only the FLSA premium portion deductible — not the entire overtime payment?

**Because 'No Tax on Overtime' means 'no tax on the half-time premium.'** OBBBA targets the extra 0.5× employers pay above your base rate, defined under FLSA. The straight-time 1× base is compensation for hours worked, so it's taxed normally.

What is the income phase-out for the OBBBA overtime deduction?

**The deduction starts shrinking at $150,000 MAGI (single) or $300,000 (joint).** Each $1,000 above the threshold reduces the deduction by $100. It's fully gone at $275,000 single or $550,000 joint.

Can I claim the deduction if I am married filing separately?

**No — IRC §225 requires married taxpayers to file a joint return.** This calculator shows a $0 effective deduction and $0 estimated federal tax savings for married filing separately.

Does my state honor the federal No Tax on Overtime deduction?

**It varies by state — the federal deduction does not carry over automatically.** As checked on the Sources date: California reports nonconformity; Indiana allows a 2026-only state deduction; Michigan covers 2026–2028; Wisconsin's AB 461 is veto-sustained. For other states (including NY and GA), confirm with your Department of Revenue before filing. Eight states with no broad income tax (AK, FL, NV, NH, SD, TN, TX, WA) have no conformity question.

How do I report this on my W-2 and Schedule 1-A?

**Use the W-2 or 1099 route, then Schedule 1-A.** For 2025, employers may use box 14 with any label or skip the line entirely (Notice 2025-69). From 2026, qualified overtime must appear in box 12 code TT. The total flows to Form 1040 line 13b. This calculator remains a federal estimate, not filing advice.

What happens after December 31, 2028?

**The deduction expires — there is no automatic extension.** IRC §225 allows no deduction for tax years beginning after 2028-12-31. Watch for legislative activity in 2027-Q4 / 2028-Q1; if nothing passes, overtime earned in 2029 returns to fully taxable.

Does the No Tax on Overtime deduction also reduce Social Security or Medicare tax?

**No — OBBBA only affects federal income tax.** FICA payroll taxes (Social Security 6.2% + Medicare 1.45%, plus the employer match) still apply to your full overtime pay, including the premium portion.

No Tax on Overtime Calculator (2025–2028 OBBBA Federal Deduction)

Q: What is the No Tax on Overtime deduction created by OBBBA?

**It's a federal income-tax deduction for the extra half of overtime pay — the 0.5× premium in time-and-a-half.** OBBBA (the One Big Beautiful Bill Act, Public Law 119-21, signed 2025-07-04) added IRC §225 to the Internal Revenue Code. It applies to tax years 2025 through 2028.

See how much of your overtime pay escapes federal income tax under OBBBA — up to $12,500 single / $25,000 joint — before MAGI phase-out and state tax kick in.

OBBBA 2025–2028

IRC §225

No Signup

Payor 1

Payor details

Payor Name

Payor source

Tax Year

Overtime information

Material type

Amount shown on your material ($)

Enter the qualified overtime amount exactly as reported. Do not halve it again.

Required. Enter an amount from $0 to $1,000,000,000.

Calculated Qualified Overtime Amount$0.00

Method Used: Qualified amount already reported · Raw Input: Amount shown: $0.00

1 payor

Your tax situation

These apply to your whole return, not to each payor.

Filing Status

Modified AGI (MAGI)

Required. Enter an amount from $0 to $1,000,000,000.

Marginal Federal Tax Rate

Optional state conformity note

State

This does not change the federal deduction or savings above. It only shows a state-specific note.

Educational federal estimate only. It does not calculate a full paycheck, exact W-4 withholding, refund, FICA, or state tax, and it cannot determine whether you qualify or replace tax advice.

So what does this mean for you?

OBBBA lets you deduct the extra half of qualifying overtime pay — up to $12,500 (single) or $25,000 (joint) — for tax years 2025 through 2028.

Without it, that premium is ordinary taxable income, just like your base rate.

And the window is not permanent: after December 31, 2028, the deduction is gone unless Congress extends it.

Doing this right gets you:

A federal deduction estimate straight from the pay documents you already have
A clear view of how the annual cap and MAGI phase-out shrink it before you file
A state-by-state note so you're not surprised when your state tax is calculated

Use the calculator in three steps

Start with the document you already have — a W-2, pay stub, or 2025 pay statement. Don't guess.

Pick a payor and the material you have

Each payor gets its own section. Choose W-2 or 1099, then the material type that matches your record.

Enter the amount (or rate + hours)

If a W-2 or employer statement already reports qualified overtime, enter it as-is — don't divide it again. For 2025 records, choose the matching transition method.

Set your filing status, MAGI, and tax rate

These apply once to your whole return. The result card shows your effective deduction and estimated federal savings.

Only hours above 40 in each workweek count. State-law, contract, and holiday premiums stay outside this deduction.

See the deduction play out

Each example follows the same path you'll use in the calculator: material → method → deduction → savings.

Illustrative examples, not your tax result.

2026 W-2 reports the qualified amount

Input material: W-2 box 12 code TT: $1,650; single filer; MAGI $60,000; 22% marginal federal rate.
Method: 2026+ employer-reported amount — enter $1,650 directly; do not divide it again.
Reproducible output: Qualified overtime $1,650 → effective deduction $1,650 → estimated federal tax savings $363.
Why this result: The reported amount is already qualified overtime, below the $12,500 cap and below the MAGI phase-out threshold.
Reusable pattern: For 2026 and later, start with the employer-reported qualified amount instead of rebuilding a premium from total overtime pay.
Use only when: Use this only when your W-2 code TT, box 14, employer statement, or other record already identifies qualified overtime compensation.

2025 aggregate 1.5× overtime pay needs transition relief

Input material: 2025 annual statement shows $15,000 aggregate 1.5× overtime pay; joint filer; MAGI $310,000; 22% marginal federal rate.
Method: 2025 transition calculation — one-third of $15,000 = $5,000 qualified overtime.
Reproducible output: Qualified overtime $5,000 → $1,000 MAGI reduction → effective deduction $4,000 → estimated federal tax savings $880.
Why this result: IRS Notice 2025-69 permits the one-third reasonable method for 2025 aggregate 1.5× overtime pay; joint MAGI is $10,000 over the $300,000 threshold.
Reusable pattern: A 2025 record that combines straight time and 1.5× overtime is not a reported qualified amount. Apply only the matching transition method before the return-level phase-out.
Use only when: Use this only for tax year 2025 aggregate 1.5× overtime pay. Do not use it for 2026+ reporting or for a record that already states qualified overtime.

Employer-reported amount can still phase out

Input material: 2026 employer statement identifies $10,000 qualified overtime; single filer; MAGI $280,000; 32% marginal federal rate.
Method: 2026+ employer-reported amount — enter $10,000 directly.
Reproducible output: Qualified overtime $10,000 → effective deduction $0 → estimated federal tax savings $0.
Why this result: Single MAGI is at least $275,000, the point where the $100-per-$1,000 phase-out removes the maximum $12,500 single-filer deduction.
Reusable pattern: A valid employer-reported amount establishes the input, not the final deduction. Caps and MAGI still apply once to all valid payor amounts.
Use only when: This is a federal estimate only. It does not decide eligibility, state treatment, withholding, or a refund.

State-law, contract, and holiday premiums stay outside the deduction

Input material: Pay stubs show 260 hours of daily California overtime at 1.5×, a $500 collective-bargaining contract premium, and $300 of holiday pay; no W-2 code TT amount.
Method: No eligible material — none of these amounts is FLSA-qualified overtime above the 40-hour workweek, so nothing is entered.
Reproducible output: Qualified overtime $0 → effective deduction $0 → estimated federal tax savings $0.
Why this result: IRC §225 covers only the FLSA §7 premium for hours above 40 in each workweek. Daily state-law overtime, contract premiums, holiday premiums, and pay above FLSA's minimum 1.5× rate are outside the deduction.
Reusable pattern: The calculator's FLSA overtime hours input counts only hours above the federal 40-hour workweek at FLSA's required rate — never state-law, contract, or holiday extras.
Use only when: Use the FLSA hours input only for hours over 40 in each workweek; enter other premiums only when a payer has already reported them as qualified overtime.

Which method matches your pay record?

Pick the method that matches the document you have. A reported qualified amount goes in directly; the IRS 2025 transition methods apply only to 2025 records. This tool never guesses your FLSA status, pay type, or regular rate.

Step 1 · Qualified overtime = the selected reported amount or the selected IRS 2025 method (1×, ÷3, ÷2, ÷4, or regular rate × 0.5 × FLSA hours)

Step 2 · Add valid payor amounts, then apply the annual cap once: min(aggregate qualified overtime, $12,500 for eligible non-joint filers / $25,000 joint)

Step 3 · Apply the MAGI phase-out once to the capped aggregate: floor(max(0, MAGI − threshold) / 1,000) × $100

Step 4 · Savings = effective deduction × marginal federal rate

Reference: IRC §225 (added by OBBBA §70202, Public Law 119-21); IRS Notice 2025-69 specifies the 2025 transition methods. Use payer-reported qualified overtime for 2026–2028. The deduction sunsets December 31, 2028 unless Congress extends it.

Qualified amount already reported (W-2 box 12 code TT, box 14, or employer statement)

You need: W-2 box 12 code TT, W-2 box 14, an employer statement, or another statement that already identifies qualified overtime compensation.
Formula: Reported qualified amount × 1.
Applies to: 2025–2028.
Use only if: The payer has already identified this amount as qualified overtime compensation.
Does not include: Do not halve this reported qualified amount again; this tool does not independently verify FLSA eligibility.

2025 separately stated FLSA overtime premium

You need: A 2025 statement covering the year that separately lists the FLSA overtime premium.
Formula: Separately stated FLSA overtime premium × 1.
Applies to: 2025 transition method only.
Use only if: The separate amount is the FLSA-required half portion of 1.5× overtime for an FLSA-eligible employee.
Does not include: State-law, contract, holiday, and other extra premiums.

2025 aggregate 1.5× overtime pay

You need: A 2025 statement covering the year with one aggregate amount for 1.5× overtime pay, including regular wages for the overtime hours.
Formula: Aggregate 1.5× overtime pay ÷ 3.
Applies to: 2025 transition method only.
Use only if: The amount is only FLSA 1.5× overtime for hours over 40 in each workweek.
Does not include: Other pay types and any premium above FLSA's required half.

2025 separately stated 2× overtime premium

You need: A 2025 statement covering the year that separately lists the portion above the regular rate for 2× overtime.
Formula: Separately stated 2× premium ÷ 2.
Applies to: 2025 transition method only.
Use only if: The payment is 2× for FLSA overtime hours; only the required half of the regular rate qualifies.
Does not include: The additional premium above the FLSA-required half and non-FLSA overtime.

2025 aggregate 2× overtime pay

You need: A 2025 statement covering the year with one aggregate amount for 2× overtime pay, including regular wages for the overtime hours.
Formula: Aggregate 2× overtime pay ÷ 4.
Applies to: 2025 transition method only.
Use only if: The amount is 2× pay for FLSA overtime hours over 40 in each workweek.
Does not include: The extra double-time premium above FLSA's required half and non-FLSA overtime.

2025 confirmed regular rate and FLSA overtime hours

You need: A confirmed FLSA regular rate and qualifying FLSA overtime hours from 2025 pay or time records.
Formula: Confirmed regular rate × 0.5 × qualifying FLSA overtime hours.
Applies to: 2025 transition method only.
Use only if: You have made a reasonable effort to identify an FLSA-eligible employee, regular rate, and hours over 40 in each workweek.
Does not include: This tool does not infer FLSA eligibility, pay type, regular rate, state-law overtime, contract premiums, or holiday pay.

How to report this deduction on your return

You claim it on Schedule 1-A, a new Form 1040 attachment introduced for tax year 2025. The form applies the cap and phase-out automatically — your job is to report the right amount from the right source:

Tax year 2025 W-2: Optional — IRS Notice 2025-69 transition relief lets employers use box 14 with any label, or skip the OT line entirely. If an employer, pay stub, or box 14 identifies a qualified overtime amount, use it directly; otherwise use only the limited FLSA estimate.
Tax year 2026+ W-2: Mandatory — qualified OT compensation must appear in box 12 with code 'TT'.
Schedule 1-A Part III: Line 14a = qualified OT from W-2 box 1. Line 14b = qualified OT from 1099-NEC box 1 / 1099-MISC box 3. Total flows to Form 1040 Line 13b.
Records to keep: For a reported amount, keep the W-2 (box 12 code TT; box 14 or an employer statement for 2025) or the 1099-NEC / 1099-MISC plus any payer statement that identifies the qualified overtime. For a 2025 transition calculation, keep those same documents plus pay statements and the calculation records behind the method you used.
Filing requirements: If married, you must file jointly (no MFS). Both spouses must have Social Security numbers valid for employment.

Does your state honor the federal deduction?

The federal deduction does not automatically apply at the state level. Checked rows cover CA, IN, MI, WI; for other states (including NY and GA) confirm with your Department of Revenue before filing. Eight states with no broad income tax (AK, FL, NV, NH, SD, TN, TX, WA) have no conformity question.

State rows last checked: 2026-08-03

California

Non-conform

FTB reports California does not conform to the IRC §225 overtime deduction — state income tax still applies to full overtime pay.

Indiana

Conform 2026 (single year)

Indiana DOR Information Bulletin #128 allows a state deduction for qualified overtime for tax year 2026 only.

Michigan

Conform 2026–2028

Public Act 24 of 2025 (approved 2025-10-07) allows a state deduction for IRC §225 qualified overtime for tax years beginning after 2025-12-31 and before 2029-01-01.

Wisconsin

Veto sustained

2025 Assembly Bill 461 (overtime income-tax subtraction) has status Veto Sustained — no state overtime subtraction from that bill is in effect.

Still deciding whether this deduction is worth the paperwork? The window has an end date.

How long does the deduction last?

The deduction is not permanent — these six dates define the window.

2025-07-04
OBBBA signed into law (Public Law 119-21) — adds IRC §225. Deduction applies retroactively to OT earned from January 1, 2025.
2025-11
IRS Notice 2025-69 issued — transition relief for tax year 2025 W-2 reporting (employers may use box 14 with any label, or omit the OT line entirely).
2026 Tax Season
First filing season to claim the deduction (for the 2025 tax year). Search demand peaks here.
2026-01-01
Mandatory W-2 box 12 code 'TT' reporting begins for tax year 2026 onward.
2027-Q4 / 2028-Q1
Congressional window to extend or replace the deduction. No automatic renewal — extension requires new legislation.
2028-12-31
Deduction sunsets. OT earned after this date is no longer eligible unless Congress acts.

Every date above comes from a primary source — the links are below.

Where these numbers come from

Rules last checked: 2026-08-03

Each federal claim below links to the IRS, Congress, or DOL source checked on the date shown. State rows cite the state government source used for this review; unverified state claims were removed or softened.

FLSA premium portion only
The deduction covers qualified overtime compensation required under FLSA §7 that exceeds the regular rate — generally the half in time-and-a-half, not the full OT payment.
IRS — Q&A on qualified overtime compensation (FS-2026-01)
Annual deduction caps
The deduction is limited to $12,500 per return, or $25,000 on a joint return, before MAGI phase-out.
IRS Notice 2025-69 — IRC §225(b)(1) dollar limitation
MAGI phase-out
Phase-out begins above $150,000 MAGI ($300,000 joint). Schedule 1-A divides excess MAGI by $1,000 (round down), multiplies by $100, and reduces the capped deduction. Fully phased out at $275,000 single / $550,000 joint.
2025 Schedule 1-A (Form 1040) Part III, lines 15–21
2025–2028 window
OBBBA (Public Law 119-21) was signed July 4, 2025. The deduction applies for tax years 2025 through 2028 (taxable years beginning after December 31, 2024, and before January 1, 2029).
Congress.gov — H.R.1 / Public Law 119-21 (signed 2025-07-04)
W-2 reporting
For tax year 2025, employers are not required to separately report qualified overtime (Notice 2025-69 transition relief). For 2026 onward, Form W-2 box 12 code TT reports total qualified overtime compensation.
IRS Notice 2025-69 — 2025 transition relief for overtime reporting
2025 material-based transition methods
Notice 2025-69 permits a separately stated FLSA premium, one-third of aggregate 1.5× overtime pay, one-half of a separately stated 2× premium, one-fourth of aggregate 2× overtime pay, or a reasonable regular-rate-and-hours method for tax year 2025. These methods do not determine FLSA eligibility for the taxpayer.
IRS Notice 2025-69 — reasonable methods for 2025 qualified overtime
Schedule 1-A filing
Claim the deduction on Schedule 1-A Part III (lines 14a/14b → 21). The Part VI total flows to Form 1040 line 13b. Married taxpayers must file jointly; a valid work Social Security number is required.
2025 Schedule 1-A (Form 1040) Parts III and VI
Married filing separately is ineligible
A married taxpayer must file a joint return to claim the IRC §225 qualified-overtime deduction. Married filing separately has no deduction or federal tax savings under this calculator.
2025 Schedule 1-A (Form 1040) — filing-status eligibility
California conformity
California does not conform to the IRC §225 overtime deduction (PL 119-21 §70202). State income tax still applies to qualifying overtime pay.
California FTB — Summary of Federal Income Tax Changes (PL 119-21 §70202)
Michigan conformity
Michigan Public Act 24 of 2025 (approved October 7, 2025) allows a state deduction for qualified overtime under IRC §225 for tax years beginning after December 31, 2025, and before January 1, 2029 (2026–2028).
Michigan Public Act 24 of 2025
Indiana conformity
Indiana allows a state deduction for qualified overtime compensation for the 2026 tax year only, beginning from the federal Schedule 1-A line 21 amount.
Indiana DOR Information Bulletin #128
Wisconsin conformity
2025 Assembly Bill 461 (income tax subtraction for certain overtime compensation) has status Veto Sustained — no Wisconsin overtime subtraction is in effect from that bill.
Wisconsin Legislature — 2025 Assembly Bill 461

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Frequently Asked Questions

It's a federal income-tax deduction for the extra half of overtime pay — the 0.5× premium in time-and-a-half.

OBBBA (the One Big Beautiful Bill Act, Public Law 119-21, signed 2025-07-04) added IRC §225 to the Internal Revenue Code. It applies to tax years 2025 through 2028.

What to read next

When does No Tax on Overtime start? Read the OBBBA policy guide FLSA overtime rules — which overtime actually qualifies Calculate your overtime pay (pre-tax)California overtime calculator (CA does not conform to OBBBA)How to calculate overtime pay — step by step