If the FLSA requires time-and-a-half, the half-time premium above the regular rate is generally qualified overtime compensation.
2026 federal deduction
Qualified overtime deduction calculator
Estimate the part of FLSA overtime compensation that may qualify for the federal deduction. For ordinary time-and-a-half pay, the qualified amount is generally the extra half-time premium, not all pay earned during overtime hours.
This is a tax-planning estimate, not a determination that a worker or payment qualifies. Eligibility depends on the FLSA, payroll records, filing status, modified adjusted gross income, and current IRS guidance.
What the deduction covers
The overtime premium is different from total overtime pay.
The maximum is $12,500 per return, or $25,000 for a married couple filing jointly.
The deduction begins to phase out above $150,000 of modified adjusted gross income, or $300,000 on a joint return.
Worked example
A $30 hourly rate with 10 overtime hours
| Calculation | Weekly amount | 40-week amount |
|---|---|---|
| Regular pay for 40 hours | $1,200 | $48,000 |
| Total pay for 10 overtime hours at $45 | $450 | $18,000 |
| Potentially qualified half-time premium | $150 | $6,000 |
In this example, the potential deduction starts from $6,000, not the full $18,000 paid for overtime hours. The annual cap and MAGI phaseout are applied after identifying qualified compensation.
Eligibility checks
Questions to answer before using the result
Was the overtime required by the FLSA?
The worker generally must be covered and nonexempt, and the payment must be overtime required under section 7 of the FLSA. Extra pay required only by state law, a contract, or an employer policy may not be qualified compensation.
What does the payroll statement report?
For 2026 and later years covered by the provision, employers and other payers have separate reporting requirements for qualified overtime compensation. Use the reported amount when available.
Do Social Security and Medicare still apply?
Yes, overtime compensation is still generally subject to Social Security and Medicare taxes. The deduction affects federal taxable income; it does not make the wages exempt from FICA.
Official sources
Rules used by this calculator
IRS qualified overtime compensation FAQs
IRS Publication 15 (2026)
26 USC Section 225
US DOL overtime guidance
Reviewed August 15, 2026. The calculator assumes the common FLSA time-and-a-half rule and does not determine coverage, exemptions, special work periods, or the regular rate for bonuses and other compensation.