2026 tax guide
No Tax on Overtime 2026
How the 2026 qualified overtime compensation deduction works, including the cap, MAGI phaseout, and reporting notes.
How no tax on overtime works in 2026
The overtime provision is a federal income-tax deduction for tax years 2025-2028. It reduces taxable income on the return; it does not make the entire overtime paycheck free from payroll tax.
2026 deduction cap and phaseout
The maximum annual deduction is $12,500 per return, or $25,000 for married filing jointly. The deduction begins phasing out above $150,000 of MAGI, or $300,000 for joint filers.
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.
No tax on overtime 2026 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.