Overtime pay formula
Weekly pay = (Rate × Regular hours) + (Rate × 1.5 × Overtime hours) + (Rate × 2 × Double-time hours)
Under the Fair Labor Standards Act, overtime is based on the workweek, not the pay period. If you work 50 hours one week and 30 the next, you're owed 10 hours of overtime even though the two weeks average 40. Your "regular rate" also has to include most non-discretionary bonuses and shift differentials, which can raise your overtime rate.
How the 2026 overtime deduction works
From 2025 through 2028, you can deduct "qualified overtime compensation" from federal taxable income:
- Only the premium half of FLSA time-and-a-half counts. At $22/hour, that's $11 of the $33 overtime rate.
- Capped at $12,500 a year ($25,000 married filing jointly).
- Phases out by $100 for every $1,000 of modified AGI over $150,000 ($300,000 joint).
- Married filing separately is not eligible. Overtime required only by state law or a union contract doesn't qualify.
- It lowers federal income tax only. Social Security, Medicare and state taxes still apply.
Starting with 2026 W-2s, employers report qualified overtime in box 12 with code TT. To see the savings in each paycheck, claim it on Step 4(b) of a 2026 W-4. Get a detailed estimate with the no tax on overtime calculator.