By Mudassir Khan
Planning your 2027 taxes? The federal overtime deduction is still the same deal: only the premium half of FLSA overtime counts, capped and phased out by income. This calculator estimates your 2027 deduction and your likely federal tax saving, step by step.
Rules verified November 2026 · Sources: IRS, U.S. Department of Labor
For 2027, the federal no tax on overtime deduction covers only the premium half of FLSA overtime, capped at $12,500 single or $25,000 joint, phasing out above $150,000 MAGI ($300,000 joint). The IRS has announced no inflation adjustment to these figures as of November 2026. Social Security and Medicare taxes still apply to all overtime pay.
Tax year 2027 · IRC §225 · Per current IRS guidance, subject to inflation adjustment
Estimates only. Not tax, legal, or payroll advice. Confirm with your employer or a qualified professional.
Estimate only, not tax advice. Married filing separately cannot claim this deduction. A valid SSN is required, and married couples must file jointly.
2027 figures use the current statutory caps and thresholds per IRS guidance. If the IRS later announces 2027 inflation adjustments, the calculator will be updated. Want the final year? See the 2028 calculator.
Three things make the 2027 tax year worth a dedicated estimate:
Example 1: under the cap, under the phase out. Single filer, $8,000 of qualified overtime premium in 2027, MAGI $90,000. The $8,000 is under the $12,500 cap, and MAGI is under the $150,000 threshold, so the full $8,000 is deductible. At the 22% bracket, federal tax saved = $8,000 × 22% = $1,760.
Example 2: joint filers, capped and phased out. Married filing jointly, $30,000 of qualified overtime premium, MAGI $310,000. After the $25,000 joint cap: $25,000. Phase out reduction: MAGI is $10,000 over the $300,000 threshold, so the deduction drops by $1,000. Deduction = $25,000 minus $1,000 = $24,000. At the 24% bracket, federal tax saved = $24,000 × 24% = $5,760.
Example 3: phase out with a smaller premium. Single filer, $10,000 of qualified overtime premium, MAGI $160,000. Under the cap: $10,000. Phase out reduction: MAGI is $10,000 over the $150,000 threshold, so the deduction drops by $1,000. Deduction = $10,000 minus $1,000 = $9,000. At the 22% bracket, federal tax saved = $9,000 × 22% = $1,980.
Deduction rules on this page follow IRS guidance on the Working Families Tax Cuts provisions, including the 2027 reporting rules in IRS Fact Sheet FS-2026-13 (August 2026). The overtime itself must qualify under U.S. Department of Labor FLSA rules.
No. As of November 2026 there is no announced 2027 inflation adjustment to the $12,500 / $25,000 caps or the $150,000 / $300,000 phase out thresholds. The calculator uses current statutory figures and says so.
Only the premium portion required by the FLSA, the extra "half" in time and a half. At $30/hour, an overtime hour pays $45, of which $15 qualifies.
On your 2027 W-2, Box 12, code TT. Reporting has been mandatory since 2026, so the figure arrives on your W-2, and your deduction is generally limited to what was reported.
Yes, same rules, same caps and phase out, claimed on Schedule 1-A, FICA untouched. The practical difference is that reporting has now been mandatory for two years.
No, 2028 is the final year under current law. 2027 is the third year of four.
No, it's an income tax deduction only. FICA taxes apply to overtime wages in full.
New to the deduction? Start with the main no tax on overtime calculator, then read the phase out guide if your income is near the thresholds. For the last year of the provision, use the 2028 calculator.