Overtime is not fully tax-free. You can deduct only the premium part, the “half” in time and a half, up to $12,500 a year ($25,000 married filing jointly). If you earned $9,000 of time-and-a-half pay, $3,000 is deductible, which saves a single filer with $60,000 of income about $360.
You can deduct —, which lowers your federal income tax by about —.
| Qualified overtime premium | |
| Annual limit | |
| Reduction for income over the threshold | |
| Deduction (Schedule 1-A) | |
| Federal income tax without the deduction | |
| Federal income tax with the deduction | |
| Tax saved |
Federal income tax only, with the 2026 standard deduction and no credits. Social Security and Medicare still apply to overtime.
| Overtime pay (1.5×) | Premium | Total income | Deduction | Federal tax saved |
|---|---|---|---|---|
| $3,000 | $1,000 | $45,000 | $1,000 | $120 |
| $6,000 | $2,000 | $60,000 | $2,000 | $240 |
| $9,000 | $3,000 | $75,000 | $3,000 | $660 |
| $15,000 | $5,000 | $90,000 | $5,000 | $1,100 |
| $45,000 | $15,000 | $120,000 | $12,500 | $2,750 |
| $9,000 | $3,000 | $170,000 | $1,000 | $240 |
Single filer, 2026 brackets and standard deduction, no credits. The $45,000 row hits the $12,500 limit; the last row shows the reduction above $150,000 of income.
To work out your overtime pay first, use the overtime calculator. Tipped workers can also use the No Tax on Tips calculator; both deductions can be claimed together.
Updated November 2026. Sources: IRS overtime deduction FAQs (updated August 2026), Schedule 1-A (Form 1040), 26 U.S.C. § 225. Methodology.
© 2026 PaycheckGauge. Estimates only, not tax advice.