No Tax on Overtime Deduction 2026
Deduct the time-and-a-half premium portion of your overtime pay — up to $12,500 single or $25,000 married filing jointly.
What the overtime deduction means in plain English
The One Big Beautiful Bill Act lets workers deduct qualified overtime pay for tax years 2025 and 2026. The deduction applies to the premium portion of overtime — the extra 'half' in time-and-a-half required under the Fair Labor Standards Act (FLSA) for hours worked over 40 in a week.
Importantly, only the premium counts, not your entire overtime paycheck. If your regular rate is $20/hour and overtime pays $30/hour, only the extra $10/hour qualifies. The deduction is capped at $12,500 for single filers and $25,000 for married couples filing jointly.
Like the other Schedule 1-A deductions, it is claimed above the line on Form 1040, Line 13b, works alongside the standard deduction, reduces income tax only, and phases out at higher incomes. Your employer should separately report the qualifying overtime premium.
Estimate your overtime deduction
Who qualifies
- You received FLSA-required overtime for hours worked beyond 40 in a workweek.
- Your employer separately reports the overtime premium portion (W-2 or a qualifying payroll statement).
- Your MAGI is below the phase-out ceiling for your filing status.
- You have a valid Social Security number and, if married, generally file jointly.
Common mistakes to avoid
- Entering total overtime wages instead of just the premium (the extra 0.5×) — only the premium is deductible.
- Treating bonuses, shift differentials, or contractual overtime above FLSA rules as qualifying.
- Counting 'overtime' that isn't FLSA-required, such as hours under 40 paid at a higher rate.
- Ignoring the MAGI phase-out, which reduces the deduction $100 per $1,000 over the threshold.
Overtime Deduction FAQs
How much overtime can I deduct in 2026?
You can deduct the FLSA overtime premium up to $12,500 if single and $25,000 if married filing jointly for 2026. Only the premium portion — the extra half-time pay for hours over 40 per week — qualifies, not your full overtime wages. The deduction phases out above $150,000 MAGI (single) / $300,000 (MFJ). Verify with IRS Schedule 1-A instructions.
What part of my overtime pay actually qualifies?
Only the premium — the additional 0.5× of your regular rate that makes overtime 'time-and-a-half.' If you earn $20/hour normally and $30/hour in overtime, the qualifying premium is $10 for each overtime hour. Your employer should report this premium separately.
Do bonuses or shift differentials count as overtime?
No. Bonuses, shift differentials, and any overtime not required by the FLSA generally do not qualify. The deduction is limited to the FLSA-mandated overtime premium for hours worked beyond 40 in a workweek.
Can I claim both the overtime and tips deductions?
Yes. The overtime and tips deductions are separate Schedule 1-A line items with their own caps. If you have both qualifying tips and qualifying overtime premium, you can claim each up to its own limit, subject to the income phase-outs.
IRS sources & verification
Last verified June 13, 2026.