OBBBA §225 · Tax years 2025–2028

No Tax on Overtime Calculator

Estimate your qualified overtime deduction under the One Big Beautiful Bill Act — the "half" in time-and-a-half can now be deducted from federal taxable income. Free, instant, nothing you type leaves your device.

Enter your numbers

If you have your 2026 W-2, enter the box 12 code TT amount. For tax years after 2025 the IRS says you may not claim more than that reported amount. Leave blank for an uncapped estimate.

ESTIMATED FEDERAL TAX SAVED PER YEAR
$0
Qualified overtime premium (annual)$0
Statutory cap$0
Deduction after phase-out$0
W-2 Box 12 code TT ceilingNot entered
Hourly premium that qualifies$0.00
No W-2 amount entered — this is an uncapped estimate. For tax years after 2025, when you file, your deduction cannot exceed the qualified overtime reported in W-2 Box 12, code TT. Box 12 reports the total qualified overtime paid, not your deductible amount — the statutory cap and MAGI phase-out still apply. If your W-2 is wrong, ask your employer for a corrected W-2c. Source: IRS Fact Sheet FS-2026-13, Q10 / Q20 / Q22, verified 2026-11-13; the statute and Notice 2025-69 remain controlling.

Estimates only, not tax advice. State income tax on overtime is unchanged unless your state conforms. Payroll taxes (Social Security & Medicare) are not affected.

How the deduction works

The OBBBA (signed July 4, 2025) added a deduction for qualified overtime compensation for tax years 2025 through 2028. Only the premium portion required by the Fair Labor Standards Act qualifies — the "half" in time-and-a-half. Example: at a $20 regular rate, overtime is paid at $30; only the extra $10 per overtime hour is deductible.

The math in three steps

1. Premium = overtime hours × regular rate × 0.5 (annual total)
2. Cap = $12,500 (single) or $25,000 (married filing jointly)
3. Phase-out = deduction reduced by $100 for each $1,000 of modified AGI above $150,000 (single) or $300,000 (joint)

Worked example

Maria earns $24/hr and works 8 overtime hours a week, 50 weeks a year.
Premium = 8 × $24 × 0.5 × 50 = $4,800 deductible.
At a 12% marginal rate she saves about $576 in federal tax for the year.

What qualifies

Box 12 code TT shows the total qualified overtime paid during the year, not the amount you can deduct — the statutory cap and MAGI phase-out still apply. For tax years after 2025 you may not claim more qualified overtime than the amount reported to you; if the W-2 is wrong, request a W-2c. Source: IRS Fact Sheet FS-2026-13, Q6 / Q10 / Q20 / Q22, verified 2026-11-13. As an IRS FAQ (not published in the Internal Revenue Bulletin) it is guidance rather than binding authority.

What does NOT qualify

You do not need to itemize to claim it, but you must have a valid Social Security number. Employees should not expect bigger paychecks during the year — this is claimed when you file your return.

FAQ

Do I still pay Social Security and Medicare on overtime?
Yes. The deduction only reduces federal income tax. Payroll (FICA) taxes are unchanged.
Does my state still tax overtime?
We do not assert whether any state conforms. The federal deduction reduces federal taxable income rather than federal AGI, so a state starting from AGI does not automatically inherit it. We have not verified any state's current position against a first-party source — verify with your state tax agency before filing. See the calculator for your state →
I make $160,000. Can I still claim it?
Partially. The deduction shrinks by $100 for every $1,000 of MAGI above $150,000 (single). At $160,000 single, it drops by $1,000.
Is double time included?
Only if the extra pay is FLSA-required. Voluntary premium agreements beyond FLSA do not qualify.
How do I claim it for 2025?
Employers were not required to separately report it for 2025. Use pay stubs or payroll records per IRS Notice 2025-69. From 2026, look for W-2 Box 12 code "TT", or 1099-MISC box 14 / 1099-NEC box 1d for non-employee payers.
Is the W-2 Box 12 code TT amount the same as my deduction?
No. Box 12 code TT reports the total qualified overtime paid for the year, not the amount you may deduct. The IRS gives the example of $30,000 paid in 2026 still reported as $30,000 even though the deduction is capped at $12,500 (or $25,000 jointly). The FLSA-premium test, the statutory cap and the MAGI phase-out still apply. Source: IRS Fact Sheet FS-2026-13, Q10, verified 2026-11-13.
Can my deduction be larger than the amount on my 2026 W-2?
For tax years after 2025, no: the IRS says employees may not consider qualified overtime in excess of what is reported on W-2 box 12, code TT. If your W-2 understates it, ask your employer for a corrected W-2 (W-2c). That is why this calculator offers an optional W-2 Box 12 code TT field: enter it and the estimate is capped at that reported amount; leave it blank and the result is an uncapped estimate to be checked against your W-2 before filing. Source: IRS Fact Sheet FS-2026-13, Q20 and Q22, verified 2026-11-13; the statute and Notice 2025-69 remain controlling.

Related calculator

Tips and overtime are two separate OBBBA deductions with different caps and eligibility rules. If you receive tips, use the No Tax on Tips Calculator. For state-by-state rates and the state conformity question, see the state index.