What part of overtime pay qualifies?

Only the premium portion — the extra 'half' of time-and-a-half required by the Fair Labor Standards Act, not your full overtime pay. If your pay statement shows only total overtime, the IRS lets you estimate the premium as one-third of the total.

How do I claim the no-tax-on-overtime deduction?

On the new IRS Schedule 1-A filed with Form 1040. It is an above-the-line deduction, available whether you itemize or take the standard deduction. For 2025, IRS Notice 2025-69 allows reasonable methods to determine the qualified amount.

OBBBA · 2025–2028

“No Tax on Overtime” Deduction Calculator

Estimate your new qualified-overtime deduction from the One Big Beautiful Bill Act. Enter your filing status, overtime, and modified AGI — the calculator applies the $12,500 / $25,000 caps and the MAGI phase-out for tax year 2025.

Filing status

What are you entering?

Overtime premium (the extra “half” of time-and-a-half)

Modified AGI (your total income for the year)

Marginal tax bracket (optional — to estimate tax savings)

Estimated 2025 overtime deduction

Enter your overtime to estimate the deduction.

Qualified overtime premium—

Maximum deduction (your status)—

Phase-out begins (your status)—

Phase-out reduction—

Estimated federal income-tax savings—

How the “No Tax on Overtime” deduction works

Provision	Detail
Maximum deduction	$12,500 single / HoH · $25,000 married filing jointly
What qualifies	The FLSA overtime premium — the extra “half” of time-and-a-half (not full overtime pay)
Phase-out begins (MAGI)	$150,000 single / HoH · $300,000 married filing jointly
Phase-out rate	−$100 for each $1,000 of MAGI over the threshold
Tax years	2025 through 2028
How to claim	Schedule 1-A — above-the-line (works with the standard deduction)

Created by the One Big Beautiful Bill Act (OBBBA), this above-the-line deduction covers only the overtime premium — the extra half of “time-and-a-half” required by the Fair Labor Standards Act — not your full overtime pay. It reduces federal income tax only; overtime stays subject to Social Security and Medicare (FICA) tax. Married taxpayers must file jointly to claim it.

Because 2025 W-2s won't separately report the premium, IRS Notice 2025-69 lets you estimate it with reasonable methods. The simplest: if your pay statement shows only total overtime, the qualified premium is generally one-third of the total (switch the toggle above to use it). The deduction is claimed on the new Schedule 1-A.

Questions

How much overtime can I deduct in 2025?

Up to $12,500 (single/HoH) or $25,000 (joint) of the overtime premium, reduced once MAGI passes $150,000 / $300,000 by $100 for every $1,000 over.

What part of overtime qualifies?

Only the premium — the extra "half" of time-and-a-half required by the FLSA, not your full overtime pay. If you only know total overtime, estimate the premium as one-third of it.

Do I still pay Social Security and Medicare on overtime?

Yes — the deduction lowers federal income tax only. Overtime remains subject to FICA.

How do I claim it?

On the new IRS Schedule 1-A with Form 1040. It's above-the-line, so it works with the standard deduction.

Estimate only, based on the One Big Beautiful Bill Act and IRS Notice 2025-69. The one-third method is an IRS-permitted approximation; the phase-out reduction is computed in whole $1,000 increments. The exact deduction is figured on IRS Schedule 1-A. This tool does not reduce Social Security or Medicare tax. Not tax advice and not affiliated with the IRS.