Tax year 2026 · filed in 2027
Overtime premium calculator
Only the premium portion is deductible — the extra half in time-and-a-half. Rebuild it from your pay stubs, with the arithmetic shown.
Deduct up to $12,500Phases out above $150,000Tax years 2025–2028
Figures verified September 8, 2026Source: IRC § 225 and Schedule 1-ARuns in your browser — nothing you type is uploaded
OBBBA Deductions · obbbadeductions.com
Overtime premium worksheet — tax year 2026
Worksheet
Every line, with the arithmetic. Keep this with your tax records or hand it to your preparer.
| Rate period | Working | Premium |
|---|---|---|
| Rate period 1 | —Needs an hourly rate, a multiplier and hours above zero before it counts. | — |
| Qualifying premium | $0.00 | |
| Deduction | $0.00 | |
| Estimated federal tax savedEnter your income or a marginal rate above to see this. | — | |
- State-mandated and union overtime don't qualify. Only overtime required by the federal Fair Labor Standards Act counts toward this deduction.
- This deduction is scheduled to expire after 2028.
How this is calculated
An overtime hour pays more than a regular hour. The deduction is not for the whole overtime hour — it is for the extra part only, the amount above your regular rate. That extra part is thepremium.
For each rate period:
- Take the overtime hours you worked while that rate was in force.
- Multiply by your regular hourly rate for that period — not your overtime rate.
- Multiply by the multiplier minus one. Time-and-a-half is 1.5, so the premium fraction is 0.5. Double time is 2, so the premium fraction is 1.
Add the qualifying periods together. Periods you have not confirmed as FLSA-required drop out at this point.
Then the tax limits apply, in this order:
- The total is capped — $12,500 for a single filer, $25,000 filing jointly.
- The cap is reduced if your income is above the phase-out threshold: $150,000 single, $300,000 filing jointly.
- What is left is your deduction. What it saves you is the tax on your income before it minus the tax after, worked through the brackets — less than the deduction times your top rate if it crosses into a lower bracket, and nothing at all if you owe no income tax.
A deduction is not a refund. It reduces the income you are taxed on, so a $1,000 deduction taken entirely within the 22% bracket saves $220 — not $1,000 off your tax bill.
A worked example
Dana works in a warehouse. She got a raise in July, so her overtime hours were paid at two different rates during the year. Her W-2 shows her total wages, but nowhere does it break out the premium half of her overtime — so she has to rebuild it.
Dana files as single, with a modified adjusted gross income of $68,000. What her deduction saves is worked through the 2026 brackets, assuming the standard deduction.
| Rate period | Working | Premium |
|---|---|---|
| January to June, before the raise | 180 hrs × $22.00 × (1.5 − 1) = $1,980.00 | $1,980.00 |
| July to December, after the raise | 140 hrs × $24.50 × (1.5 − 1) = $1,715.00 | $1,715.00 |
| Weekend shifts under the union agreement | 40 hrs × $24.50 × (2 − 1) = $980.00Not confirmed as FLSA-required overtime, so it is left out of the total. Overtime owed only under state law, a union agreement, or a discretionary bonus policy does not qualify. | $980.00 |
| Deduction | $3,695.00 | |
| Estimated federal tax savedWorked through the 2026 brackets, assuming the standard deduction. | $593.40 | |
The weekend shifts were real overtime and really were paid at double time, but they were owed under a union agreement rather than the FLSA — so $980.00 of premium drops out. Dana is well under both the cap and the phase-out threshold, so neither reduces anything.
After the standard deduction she has $51,900 of taxable income. The first $1,500 of her deduction comes off at 22% and the other $2,195 at 12%, which is why it saves $593.40 rather than 22% of the whole deduction.
What doesn’t count
These are all real overtime, and they will all appear on your pay stub. None of them qualifies for this deduction.
- Overtime mandated only by state law
- Overtime owed under a union or collective bargaining agreement
- Discretionary bonus overtime
- The base hourly portion of an overtime hour
If some of your overtime falls into one of these categories, put it in its own rate period and leave the FLSA box unchecked. It will show on the worksheet as excluded, with the reason — which is more useful than leaving it out, because it explains the gap between your pay stub and your deduction.
Questions
- Why can I not just use my total overtime pay?
- Because the deduction covers only the premium portion — the extra part above your regular rate. On time-and-a-half, each overtime hour pays 1.5 times your regular rate, and only the 0.5 is deductible. Someone who earned $9,000 of overtime pay at time-and-a-half has a premium of $3,000, not $9,000. Using the wrong figure is the most common mistake with this deduction.
- My W-2 does not show the premium separately. Where do I find it?
- For 2026, the W-2 has a dedicated field for qualified overtime. Before that, employers could report it in box 14 or leave it off entirely with no penalty. If your figure is missing or you want to check it, rebuild it from your pay stubs: overtime hours, your regular rate at the time, and the multiplier. That is exactly what this tool does.
- I got a raise partway through the year. Does that matter?
- Yes, and it is the main reason this is hard to do in your head. The premium depends on the regular rate in force when the overtime was worked, so overtime before and after a raise has to be calculated separately and then added together. Add one rate period per rate.
- I worked two jobs. How do I handle that?
- Add a rate period for each job. They can cover the same dates — the tool does not assume periods run one after another. Each job may also have a different overtime multiplier.
- My state requires overtime after 8 hours in a day. Does that count?
- No. Only overtime required by the federal Fair Labor Standards Act qualifies. Overtime you are owed solely because of a state rule, a union agreement, or your employer’s own policy does not, even though it is real overtime and it is on your pay stub. If some of your hours fall into that category, leave the FLSA box unchecked for those periods and they will be excluded from the total.
- What about double time?
- Double time works the same way — the premium is the part above your regular rate, so on a 2x multiplier the whole extra hour of pay is premium. Choose "Double time" for those periods, or enter a custom multiplier if yours is something else.
- I am married and filing separately. Can I claim this?
- No. A married taxpayer has to file a joint return to claim the overtime deduction at all. The tool still shows your reconstructed premium, because it is the same figure you would claim on a joint return.
- Do I have to itemize to claim this?
- No. It is available whether you itemize or take the standard deduction.
- Does my pay data get sent anywhere?
- No. Every calculation runs in your browser. Nothing you type is sent to a server, stored, or logged, and there is no analytics on the input values. Closing the tab discards it.
- How long will this deduction exist?
- It is scheduled to expire after tax year 2028. It applies to tax years 2025 onward, and § 225(g) allows no deduction for any tax year beginning after December 31, 2028.