The extra "half" of time-and-a-half pay (the amount above your regular rate). Roughly one third of total time-and-a-half overtime wages.
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Estimated federal tax savings
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Deduction: –
Qualified overtime premium–
Deduction cap–
Phase-out reduction–
Your estimated deduction–
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How the overtime deduction works
For tax years 2025 through 2028, workers can deduct qualified overtime compensation from federal taxable income — the deduction is capped at $12,500 ($25,000 for joint filers). Only the premium portion counts: the extra half-time pay required by the Fair Labor Standards Act, i.e. the amount your overtime pay exceeds your regular hourly rate. The deduction is available whether or not you itemize.
What countsOnly the FLSA "half-time" premium — not your full overtime wages. If you were paid time-and-a-half, the deductible premium is roughly one third of your overtime pay.
Example. A single worker earns $18,000 in time-and-a-half overtime. The premium portion is about $6,000. With a MAGI of $90,000 (no phase-out) and a 22% bracket, that is roughly $1,320 less federal tax.
Income limits and phase-out
The deduction phases out above a modified adjusted gross income of $150,000 ($300,000 joint), reduced by $100 for each full $1,000 of MAGI over the threshold.
How this calculator works
The tool caps the entered overtime premium at $12,500 (single) or $25,000 (joint), then subtracts the MAGI phase-out ($100 per full $1,000 over $150,000 / $300,000, rounded down per IRS rules), and multiplies the resulting deduction by your marginal bracket to estimate federal tax saved. Your tips remain subject to FICA and state tax.
Disclaimer. This calculator provides simplified estimates of federal tax only and is not tax, legal, or financial advice. Figures are based on IRS guidance as of July 2026 and may change; some 2026 rules are from proposed regulations. Consult a qualified tax professional for your situation.