The qualified overtime deduction on Schedule 1-A
Updated October 2026
The deduction covers the part of overtime pay that the Fair Labor Standards Act requires above your regular rate, the “half” in time-and-a-half. For time-and-a-half pay, the premium is one third of the total overtime paid. For double time, the FLSA still requires only half your regular rate, so the qualifying part is one quarter of the double-time pay; enter that figure with the “already just the premium” option.
Worked example (calculator default). A single worker earns $70,000, including $9,000 of overtime paid at 1.5 times the regular rate. Premium: $9,000 ÷ 3 = $3,000. Income is under $150,000, so the full $3,000 is deductible. Taxable income falls from $53,900 to $50,900; both are above the $50,400 start of the 22% bracket, so tax drops by 22% × $3,000 = $660.
FLSA-required only. Overtime must be required by section 7 of the FLSA, generally hours over 40 in a workweek for non-exempt employees. Overtime owed only under state law or a union contract (for example, daily overtime after 8 hours in some states) does not qualify. Exempt employees do not have qualified overtime, whatever they are paid. Limits: $12,500 a year, or $25,000 on a joint return, reduced by $100 for each full $1,000 of modified AGI over $150,000 ($300,000 joint). Filing: a valid Social Security number and, if married, a joint return. The deduction ends after the 2028 tax year.
From 2026, employers must report qualified overtime separately on Form W-2 (or Form 1099 for non-employees). For 2025, when separate reporting was optional, IRS Notice 2025-69 and the Schedule 1-A instructions allow figuring it from pay stubs: FLSA overtime hours times half the regular rate. Federal employees can check block 35 of their SF-50: “N” means non-exempt (overtime-eligible), “E” means exempt. For the income field, use expected AGI from Form 1040 line 11.
| Worker | Qualified premium | Total income | Deduction | 2026 federal tax saved |
|---|---|---|---|---|
| $25/hr, 5 OT hours a week for 50 weeks | $3,125 | $60,000 | $3,125 | $375 |
| $45/hr nurse, 8 OT hours a week | $9,000 | $110,000 | $9,000 | $1,980 |
| $30/hr, 100 hours paid at double time | $1,500 | $70,000 | $1,500 | $330 |
| $40/hr, 600 OT hours, single | $12,000 | $165,000 | $10,500 | $2,520 |
| Married couple, both hourly | $7,400 | $150,000 | $7,400 | $1,628 |
The fourth worker’s premium is $12,000, but income of $165,000 is $15,000 over the line, so the cap is reduced by $1,500 to $11,000 and the deduction is $10,500.
| Modified AGI | Single deduction ($5,000 premium) | Joint deduction ($5,000 premium) |
|---|---|---|
| $80,000 | $5,000 | $5,000 |
| $150,000 | $5,000 | $5,000 |
| $170,000 | $3,000 | $5,000 |
| $190,000 | $1,000 | $5,000 |
| $320,000 | $0 | $3,000 |
It does not reduce Social Security, Medicare, or (unless your state adopts it) state income tax, and it does not lower adjusted gross income, so AGI-based benefits and credits are unchanged. The calculator assumes your pay is straight time-and-a-half unless you enter the premium directly, uses 2026 brackets with the standard deduction, and does not model credits. If you work under a union contract, state daily-overtime rules, a fluctuating workweek or a public-safety work period, a payroll office or tax professional can split FLSA-required overtime from the rest.
Deducting all overtime pay. The straight-time part of overtime hours is regular wages. Double time. Only the half-time premium required by the FLSA qualifies, not the extra half above time-and-a-half. California-style daily overtime. Hours over 8 in a day but under 40 in the week are paid under state law, not the FLSA. Salaried managers. Exempt employees paid for extra hours have no qualified overtime. Married filing separately. Not allowed.