Calculate your overtime pay deduction under Schedule 1-A. Non-exempt workers who put in extra hours can now deduct qualifying overtime wages from their taxable income.
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The Schedule 1-A overtime deduction allows non-exempt employees to deduct qualifying overtime pay from their federal taxable income. This new above-the-line deduction for tax year 2025 provides meaningful tax relief for hardworking Americans who regularly work more than 40 hours per week.
Overtime pay is defined as wages earned for hours worked beyond 40 in a workweek at a premium rate (typically 1.5x your regular hourly rate). The deduction applies to the premium portion of your overtime pay—essentially the extra 0.5x you earn above your regular rate.
Unlike some other Schedule 1-A deductions, the overtime deduction does not have a specific dollar cap. However, income-based phase-outs may apply, and the overtime must have been earned on or after January 20, 2025 to qualify.
Gather your pay stubs or W-2 to find total overtime hours and overtime wages
Enter your regular hourly rate and total overtime hours worked
Specify the period of overtime work (only post-January 20, 2025 qualifies)
The calculator determines your qualifying overtime premium amount
Apply any income-based phase-outs based on your MAGI
View your total overtime deduction on Line 21 of Schedule 1-A
Scenario: James works at a manufacturing plant earning $24/hour. Throughout 2025, he worked 400 overtime hours (10 hours/week average above 40).
Regular Rate
$24/hour
Overtime Hours (2025)
400 hours
Total OT Pay (1.5x)
$14,400
OT Deduction (L21)
$4,800
James earned $14,400 in overtime pay ($24 × 1.5 × 400 hours). The deductible amount is the premium portion: $24 × 0.5 × 400 = $4,800. At a 22% tax bracket, this saves him approximately $1,056 in federal taxes.
Enter overtime hours and regular rate—we calculate the premium amount automatically.
Verifies your employment status qualifies as non-exempt under federal overtime rules.
Automatically applies income-based phase-outs if your MAGI exceeds thresholds.
Non-exempt employees under the Fair Labor Standards Act (FLSA) who work more than 40 hours per week qualify. You must receive overtime pay at 1.5x your regular rate (or higher) for hours exceeding 40 per week. Exempt employees, independent contractors, and those who receive comp time instead of overtime pay do not qualify.
Overtime is defined as hours worked beyond 40 in a workweek for which you received premium pay. This includes regular overtime at time-and-a-half (1.5x), double-time if your employer offers it, and holiday overtime premiums. The key is that you must have received additional compensation above your regular rate.
Unlike the tips deduction which has a $25,000 cap, the overtime deduction does not have a specific dollar cap. However, income-based phase-outs may reduce or eliminate the deduction if your Modified Adjusted Gross Income (MAGI) exceeds certain thresholds based on your filing status.
The deductible amount is the 'premium' portion of your overtime pay—the extra 0.5x above your regular rate. For example, if you earn $20/hour regular and $30/hour overtime (1.5x), the premium is $10/hour. Multiply this by your overtime hours to get your potential deduction.
Only overtime worked on or after January 20, 2025 qualifies for the deduction. Our calculator automatically prorates based on this date. If you have detailed records of when overtime was worked, you can enter the exact qualifying amount.
This calculator provides estimates based on the information you enter. It is designed to help you understand potential deductions but does not constitute tax advice.
All calculations must be independently verified before filing. The preparer of record bears full responsibility for the accuracy of any filed return. We assume no liability for errors or omissions.Read full disclaimer →
Our free calculator helps you estimate your Schedule 1-A deduction with a complete audit trail.