Methods & sources
How this estimator works
Qualified overtime compensation (QOC) is not “all the extra money you got for working late.” It is only the FLSA §7 premium — pay that exceeds the regular rate — required for hours over 40 in a workweek.
The weekly formula
Each workweek stands alone. IRS guidance (including FS-2026-13) uses this calculation:
QOCweek = max(0, hours worked − 40) × 0.5 × regular rate
That “0.5 × regular rate” is the half-time portion of time-and-a-half. The straight-time wages for those overtime hours are ordinary wages, not QOC.
- Daily overtime, weekend premiums, and double-time above 1.5× are not extra QOC.
- If the employer pays 2× for hours over 40, QOC is still only the FLSA half-time premium.
- State-law or union overtime that is not required by FLSA §7 is not QOC.
- Hours at or under 40 in a workweek produce $0 QOC for that week, even if some hours were paid at a premium.
Official example: $20 per hour, 50 hours
An employee works 50 hours in a workweek at a $20 regular rate. Even if the employer pays double-time for the 10 overtime hours, qualified overtime is:
| Piece | Amount |
|---|---|
| Hours over 40 | 50 − 40 = 10 |
| Half-time premium | 0.5 × $20 = $10 per OT hour |
| QOC this week | 10 × $10 = $100 |
| If paid 2× instead of 1.5× | Still $100 QOC. The extra half is not FLSA-required. |
A 45-hour week at $20 is 5 × $10 = $50. A 40-hour week is $0.
Regular rate
The FLSA “regular rate” is not always the sticker hourly wage. DOL Fact Sheet 56A explains that bonuses, commissions, and some other pay can raise it. This estimator uses a simplification:
- Hourly: regular rate ≈ the hourly rate you enter.
- Salaried non-exempt: regular rate ≈ weekly salary ÷ hours worked that week.
We do not include non-discretionary bonuses or other add-ins. Treat the result as a check against payroll, not a substitute for it.
Code TT vs the deduction
Starting in tax year 2026, employers must report the full year’s QOC on Form W-2, Box 12, code TT. That number is not reduced by the deduction cap. The cap and MAGI phaseout happen later, on Schedule 1-A, Part III.
- Cap: $12,500 (Single or Head of Household) or $25,000 (Married Filing Jointly).
- Married Filing Separately: not eligible (deductible $0). Married taxpayers must file jointly to claim §225.
- MAGI phaseout: minus $100 for each complete $1,000 over $150,000 (or $300,000 MFJ).
- If the cap is fully used, the deduction reaches $0 at $275,000 MAGI ($550,000 MFJ).
- For 2026, employees generally cannot claim more than the Code TT amount. If it is wrong, request Form W-2c. Form 4852 does not count.
Worked phaseout: Single filer, MAGI $160,000, QOC at or above the cap. Excess MAGI is $10,000 = 10 complete $1,000s × $100 = $1,000 reduction. Deduction = $12,500 − $1,000 = $11,500.
Projecting a year from one week
Payroll QOC is weekly. The calculator offers two projections, both editable:
- This week, all year — weekly QOC × weeks in 2026 (default 52).
- Weeks YTD + remaining — default as of 31 Aug 2026 on a 52-week year: 35 weeks year-to-date and 17 remaining (day 243 of 365 ≈ 34.7 weeks elapsed). If you enter YTD QOC from stubs, that figure replaces estimated YTD and we add remaining weeks × this week’s QOC.
Your actual workweeks will differ. Change the counts.
FAQ
Is “no tax on overtime” a full exclusion of overtime pay?
No. Overtime wages remain taxable wages. The deduction is only the FLSA half-time premium, further limited by the cap and MAGI. Social Security and Medicare withholding are unchanged by this deduction.
Does overtime still have federal income tax withheld?
Yes. Employers must still withhold. They may not cut withholding for this deduction unless you give them a valid 2026 Form W-4. Use Step 4(b) and the deductions worksheet (line 1b) for an expected qualified overtime deduction. The IRS Tax Withholding Estimator is also updated for this item.
What if Box 12 Code TT does not match my math?
For 2026 you generally may not claim more than the reported Code TT amount. Ask your employer for Form W-2c. A substitute W-2 (Form 4852) does not satisfy the §225 reporting requirement. This estimator is a sanity check, not a substitute W-2.
I am paid a salary. Can I use this?
Only if you are FLSA overtime-eligible (non-exempt) and actually receive FLSA overtime. Many salaried jobs are exempt. We do not determine exemption. If you are non-exempt, the regular rate is typically weekly salary divided by hours worked that week.
Do I need to itemize?
No. The qualified overtime deduction is claimed on Schedule 1-A and is available whether or not you itemize deductions on Schedule A.
Where does this go on the return?
Schedule 1-A (Form 1040), Part III, for tax years 2026–2028 as currently designed. You report Code TT first; the schedule applies limits. Tax software (for example FreeTaxUSA and TaxAct) will include the form. This site is not affiliated with those products.
Citations
- IRS Q&A: deduction for qualified overtime compensation
- IRS Fact Sheet FS-2026-13 (6 August 2026) — 2026 Code TT reporting, W-2c, Form 4852, W-4 Step 4(b), Schedule 1-A Part III
- DOL WHD Fact Sheet #23: Overtime Pay
- DOL WHD Fact Sheet #56A: Regular Rate
- IRC §225 (qualified overtime compensation), as added by P.L. 119-21