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Bitrix24 No tax on overtime · Schedule 1-A · 2025–2028
No tax on overtime calculator — how much of your overtime you can deduct, and what you save
Short answer. Only the “half” of time-and-a-half is deductible. What counts: overtime the Fair Labor Standards Act (section 7) requires, only the part above your regular rate — the “half” of time-and-a-half (IRS Q&A, Notice 2025-69).
- Check box 12, code TT — your qualified overtimetype the date
- File by Tax Day, April 15, 2027 (if you get your W-2 on January 31)type the date
Check your own case.
For 2026, employers must report qualified overtime separately on the W-2. Tax Day is the IRS deadline for 2026 returns.
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No tax on overtime · Schedule 1-A · 2025–2028
Your overtime deduction — qualified overtime, limit, phase-out and tax saved
Only the “half” of time-and-a-half is deductible. Put in your hourly rate, overtime hours, weeks and total income: you see the qualified overtime, the deduction after the limit and the phase-out, and how much federal income tax it saves you. No sign-up.
- When your 2026 W-2 arrives, use box 12, code TT instead of the estimate.
- Married? You must file jointly to claim it.
- Add the deduction to the tax refund estimator to see your refund.
From IRC § 225 and Schedule 1-A: qualified overtime is the FLSA-required premium (0.5 × regular rate × overtime hours); up to $12,500 ($25,000 joint), less $100 per full $1,000 of MAGI over $150,000 ($300,000 joint). Tax saved = your 2026 federal income tax without minus with the deduction (standard deduction, 2026 brackets). Social Security, Medicare and state tax still apply. Not tax advice. Check at the start of the year.
Lida, Layers template assistant
Tell me your hourly rate and overtime hours, and I will show the deduction and the tax you save.
The Excel file shows Schedule 1-A line by line.
Deadlines
The rules, with the source
| What | Deadline | Source |
|---|---|---|
| What counts | Overtime the Fair Labor Standards Act (section 7) requires, only the part above your regular rate — the “half” of time-and-a-half | IRS Q&A, Notice 2025-69 |
| Limit | $12,500 a year; $25,000 on a joint return | IRC § 225, Schedule 1-A |
| Phase-out | $100 less for each full $1,000 of modified AGI over $150,000 ($300,000 joint) | Schedule 1-A, lines 17–21 |
| Who can claim | Valid Social Security number; married couples must file jointly; with the standard deduction or itemizing; tax years 2025–2028 | IRS — Working Families Tax Cuts |
It lowers federal income tax only — Social Security, Medicare and state income tax still apply. Overtime required only by state law or a union contract is not qualified. Check at the start of the year.
Step by step
What to do, in order
1
Take your pay stubs
Hourly rate and the overtime hours you work in a typical week.
2
Add your income
Your total income for 2026 (AGI), both spouses if you file jointly.
3
See the deduction
Qualified overtime, the limit, the phase-out and the tax you save.
Questions
Is overtime really tax-free now?
Not all of it. From 2025 through 2028 you can deduct the overtime premium the FLSA requires — the “half” in time-and-a-half — up to $12,500 ($25,000 joint). The regular-rate part of overtime pay is taxed as usual, and Social Security and Medicare still apply.
How is the no tax on overtime deduction calculated?
Qualified overtime = 0.5 × your regular rate × overtime hours. The deduction is the smaller of that and $12,500 ($25,000 joint), less $100 for each full $1,000 of modified AGI over $150,000 ($300,000 joint).
I get double time. Does it all count?
No: only the one-half premium the FLSA requires counts. If you are paid double time for hours over 40, one quarter of that overtime pay is qualified.
Does California daily overtime count?
No. Overtime that only state law requires (for example daily overtime) is not qualified overtime under the IRS rules.
Where is it on my W-2?
For 2026, employers must report qualified overtime separately — box 12, code TT. Claim the deduction on Schedule 1-A with your Form 1040.
Is it free? Do I need to sign up?
It is free and you do not need to sign up: fill in, see the result and download the files. With a free account you can save a copy to your Layers.
Official sources
- IRS — Questions and answers about the new deduction for qualified overtime compensation
- IRS — Notice 2025-69, guidance on qualified tips and qualified overtime
- IRS — Schedule 1-A (Form 1040)
- IRS — Working Families Tax Cuts: provisions for individuals and workers
- IRS — Revenue Procedure 2025-32 (2026 brackets)
Other documents
Keep the papers in one place
Letters, receipts and notices in one folder you can share with family or a lawyer. The templates and the editor are free; Layers is free for up to 20 people.
An estimate, not tax advice. Your W-2, Schedule 1-A and the IRS decide the final deduction.