The overtime deduction, explained

If you take one thing from this guide, take the first section. Nearly every mistake people make with the overtime deduction comes from misreading which part of their overtime pay it applies to.

Only the premium portion counts

An overtime hour at time-and-a-half pays one and a half times your regular rate. The deduction does not cover that hour. It covers the extra half — the part above what the hour would have paid at your regular rate.

So a worker who earned nine thousand dollars of overtime pay at time-and-a-half has a qualified overtime figure of three thousand, not nine. The other six thousand is ordinary wages that happened to be earned during overtime hours.

The arithmetic per period is hours × regular rate × (multiplier − 1). For time-and-a-half that multiplier is 1.5, so the premium fraction is 0.5. For double time it is 2, and the whole extra hour of pay is premium.

Your employer probably has not told you the number

This is the practical problem. Employers are not required to give employees a standalone total for the premium portion, and most payroll systems do not break it out on a pay stub. For 2026 the W-2 has a dedicated field for it. For the year before that, employers could report it in box 14 or leave it off entirely with no penalty.

If your figure is missing — or you want to check it — you have to rebuild it from pay stubs: overtime hours, your regular rate at the time, and the multiplier. Anyone who had a raise partway through the year, or worked two jobs, is reconstructing across several rates and has to do each separately before adding them up. The overtime premium calculator does exactly that and shows every line of the arithmetic, which is useful if you want to keep the working with your tax records.

Which overtime qualifies

Only overtime required by the federal Fair Labor Standards Act. That sentence carries more weight than it looks.

✗ Overtime mandated only by state law

✗ Overtime owed under a union or collective bargaining agreement

✗ Discretionary bonus overtime

✗ The base hourly portion of an overtime hour

All of those are real overtime. All of them show up on a pay stub the same way. None of them qualifies. If your state requires overtime after eight hours in a day, those hours are owed to you under state law rather than the FLSA, and the premium on them is not deductible. The same goes for overtime your employer owes under a union contract or its own generous policy.

Workers whose overtime comes from a mix of sources have to split it, and nobody else is going to do that for them.

If you are married, you have to file a joint return to claim this at all, and you need a valid Social Security number on the return.

Where it phases out

The cap comes first: the smaller of your qualified overtime premium and $12,500, or $25,000 on a joint return.

Then the taper reduces what is left by

$100

for every complete $1,000 of modified adjusted gross income above

$150,000

($300,000 filing jointly). Part increments are rounded down, so a few hundred dollars over a threshold step costs nothing.

Two details catch people. The taper applies to the capped amount rather than to the cap, so someone whose premium is well under the cap still loses money to it once they cross the threshold. And head of household and qualifying surviving spouse both take the lower cap and the lower threshold — the form reads “if married filing jointly” and neither of those is a joint return, even though a surviving spouse uses the joint tax brackets everywhere else.

How to claim it

Schedule 1-A, Part III. The total from that form goes on your 1040 below the adjusted gross income line, so it reduces taxable income without reducing AGI. You do not need to itemize.

The deduction runs from tax year 2025 through 2028. Section 225(g) allows no deduction for any taxable year beginning after the end of 2028, so unless Congress extends it, 2028 is the last year — a point several early write-ups got wrong by a year.

What it is actually worth

A deduction is not a refund. It reduces the income you are taxed on, so its value to you is the deduction multiplied by your marginal rate. A worker in the twelve percent bracket who deducts three thousand dollars of overtime premium saves around three hundred and sixty dollars, not three thousand.

It also does not touch payroll tax. Your overtime premium is still subject to Social Security and Medicare in full, and most states have not adopted the deduction for their own income taxes.