Only FLSA-required overtime qualifies
Qualified overtime is compensation above the regular rate that section 7 of the Fair Labor Standards Act requires. The worker generally must be covered and nonexempt under the FLSA.
Overtime created only by state law, a union agreement, an employer policy, a weekend rate, or a holiday rate may not qualify when the FLSA did not require it.
The ordinary premium is 0.5 times the regular rate
Under the general time-and-a-half rule, the regular-rate portion is ordinary wages and only the extra 0.5 premium is qualified overtime.
The estimate mode therefore uses regular hourly rate multiplied by FLSA overtime hours multiplied by 0.5.
Double time does not double the deduction
If an employer pays double time for hours over 40, federal guidance still limits qualified overtime to the half-time premium ordinarily required by the FLSA.
The employer-paid amount above time-and-a-half is not added to the deduction merely because it appears as overtime pay.
Reported amount or work estimate
For 2026 and later tax years, employers and other payers are required to separately report qualified overtime compensation on updated information returns.
Use the reported mode when you have that qualified amount. Use rate and hours only as an estimate when you are applying the general FLSA rule.
Cap and MAGI phase-out
The deduction is capped at $12,500 for a non-joint return and $25,000 for a joint return.
It phases out above $150,000 MAGI, or $300,000 on a joint return, at $100 for every complete $1,000 over the threshold. FICA and state tax are not reduced by this calculator.