Only the half-time premium counts, not the whole time-and-a-half. Overtime cap 12,500 (25,000 joint), tips cap 25,000, minus 100 for every full 1,000 of MAGI over 150,000 (300,000 joint). Schedule 1-A, tax years 2025-2028.
Do you qualify? Hourly staff paid overtime under the FLSA (over 40 hours a week) and workers in an IRS-listed tipped occupation, with a valid SSN. Married filing separately cannot claim. Tax years 2025-2028; the 2026 W-2 shows qualified overtime in Box 12 code TT.
| Total overtime pay on your pay stubs | - |
| Qualified overtime (FLSA half-premium only) | - |
| Phase-out reduction (100 per full 1,000 of MAGI over the threshold) | - |
| No tax on overtime deduction | - |
| No tax on tips deduction | - |
| Total deduction (Schedule 1-A) | - |
| Federal income tax saved | - |
| Overclaim if you enter the whole overtime pay | - |
| Tax understated by that overclaim | - |
| Possible 20% accuracy-related penalty on it | - |
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Full version — $21 once: the .xlsx workbook to keep a dated copy per employee, plus the Form W-4 Step 4(b) amount and withholding drop per paycheck. Get the workbook
The .xlsx workbook to keep one dated copy per employee or per year, with a second sheet that turns the answer into the Form W-4 Step 4(b) amount and the withholding drop per paycheck.
One payment, one licence key for this tool. The key is shown right after payment.
Overclaiming the whole overtime pay instead of the FLSA half-premium understates tax; the IRS adds interest and can add the 20% accuracy-related penalty (IRC 6662). Caps and phase-out: Schedule 1-A (Form 1040) 2025, lines 7-21.
Buy the full version — $21I have a keyYou type 8 inputs: filing status, regular hourly rate, overtime hours, overtime multiplier, qualified tips, MAGI, federal bracket and pay periods. It applies the FLSA half-premium rule, the 12,500 overtime cap (25,000 joint), the 25,000 tips cap and the Schedule 1-A phase-out of 100 per full 1,000 of MAGI over 150,000 (300,000 joint).
Payroll and HR staff who get asked by hourly nurses, warehouse crews, tradespeople and tipped servers how much of their overtime and tips is now deductible, and the employees themselves before they fill in the 2026 Form W-4 or file Schedule 1-A. Married filing separately cannot claim either deduction, so the page asks for filing status first.
Pay stubs and most quick calculators show the whole time-and-a-half. Only the half-time premium the FLSA requires is deductible, so 300 overtime hours at 30 an hour give 4,500 qualified overtime, not 13,500. The phase-out also rounds down per full 1,000 of MAGI, which a rough percentage estimate gets wrong.
The free page returns 10 results: total overtime pay, qualified overtime, phase-out reduction, overtime deduction, tips deduction, total deduction, federal tax saved, the overclaim from entering the whole overtime pay, the tax that understates, and the possible 20% penalty. Nothing is blurred or capped, and you can rerun it with your own numbers as often as you like.
In the worked example, claiming the whole 13,500 overtime pay instead of the 4,500 premium overclaims 9,000. At a 22% bracket that understates 1,980 of tax, and the IRS can add a 20% accuracy-related penalty of 396 under IRC 6662, plus interest. The paid workbook keeps a dated copy per employee and adds the W-4 Step 4(b) amount.
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