No tax on overtime: the 2026 rules
Reviewed by our office. Updated June 2026.
Hourly workers can deduct up to 12,500 dollars of overtime pay for 2026. Here is what qualifies and how to claim it.
What is the no tax on overtime deduction?
For 2025 through 2028, eligible workers can deduct the FLSA overtime premium they earned, up to 12,500 dollars (25,000 dollars joint), on top of the standard deduction. It phases out above 150,000 dollars of income (300,000 dollars joint). Source: IRS One Big Beautiful Bill provisions.
Which part of my overtime qualifies?
Only the premium portion required by the Fair Labor Standards Act, the extra half-time above your regular rate, qualifies. Regular hourly pay does not. The deductible amount is claimed on the new Schedule 1-A. Source: IRS Schedule 1-A guidance.
How Zero Fuss Taxes handles it
We separate the qualifying overtime premium from regular wages, apply the limit and phase-out, and file it correctly. One written quote first, a real preparer signs, and your fee is never based on your refund.
Common questions
How much overtime can I deduct in 2026?
You can deduct up to 12,500 dollars of qualified overtime pay (25,000 dollars for joint filers). The deduction phases out once modified adjusted gross income passes 150,000 dollars (300,000 dollars joint) and applies for tax years 2025 through 2028.
What counts as qualified overtime?
Only the overtime premium required under the Fair Labor Standards Act counts, meaning the extra half-time pay above your regular rate. Your regular wages do not qualify. Your employer reporting is the starting point for the calculation.
How do I claim the overtime deduction?
Report your full wages on Form 1040, then claim the qualified overtime amount on the new IRS Schedule 1-A. Because only the FLSA premium portion qualifies, the math is easy to get wrong without a careful review.
Can I claim both the tips and overtime deductions?
Yes, if you qualify for each. Many hourly workers earn both tips and overtime, and the two deductions are separate. A real preparer makes sure each is calculated within its own limit and phase-out on Schedule 1-A.