IRS rules
IRS No Tax on Overtime Rules
IRS source-backed notes for calculating qualified overtime compensation and understanding what the deduction does not cover.
IRS definition of qualified overtime
IRS FAQ FS-2026-01 says qualified overtime compensation is the FLSA-required overtime pay that exceeds the regular rate. For ordinary time-and-a-half overtime, the calculator uses the half-time premium as the qualified amount.
Reporting and eligibility notes
For 2026 and later tax years, IRS guidance says employers and other payers must separately report qualified overtime compensation. Married taxpayers must file jointly to claim the deduction.
Use the calculator
Enter regular hourly rate, overtime hours, weeks worked, filing status, and MAGI. If your W-2, 1099, portal, or employer statement reports qualified overtime compensation directly, use that reported amount instead of the hours estimate.
IRS no tax on overtime accuracy notes
- Rules may change as the IRS updates forms, instructions, transition relief, and reporting guidance.
- This is not tax advice, legal advice, payroll advice, or a filed tax-return calculation.
- Last updated: 2026-06-23.
- References include IRS guidance, Public Law 119-21, and mainstream tax platforms for plain-English cross-checks.
Overtime deduction sources
Common questions
Does no tax on overtime apply to the full overtime paycheck?
No. The IRS definition focuses on the FLSA-required pay above the regular rate, generally the half-time premium in time-and-a-half overtime.
What is the 2026 no tax on overtime deduction limit?
The maximum annual deduction is $12,500 per return, or $25,000 for joint filers, before MAGI phaseout.
Does the overtime deduction remove Social Security and Medicare tax?
No. This calculator treats the provision as a federal income-tax deduction. FICA, state tax, local tax, and regular payroll deductions may still apply.
Can married filing separately claim no tax on overtime?
IRS guidance says married taxpayers must file a joint return to claim the deduction.
Should I use the reported qualified overtime field?
Use it when a W-2, 1099, payroll portal, or employer statement reports qualified overtime compensation. Otherwise the calculator estimates the amount from hourly rate, overtime hours, and weeks worked.