S ShiftPay Tax DeskYour 2026 overtime & tips tax deduction.
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Overtime & Tips Tax Deduction Calculator

Estimate how much the new deductions for overtime pay and tips lower your federal tax.

🔒 Everything is calculated in your browser. Your numbers never leave your device.

Your income

Rules (edit if they change)

Estimated tax savings$2,035at a 22%
Total deduction$9,250No income phase-out
Overtime deduction$3,250Premium portion: $3,250
Tips deduction$6,000

How your deduction builds up

Tips$6,000
Overtime (premium half only)$3,250
Income phase-out$0
  • The deduction lowers federal income tax, not payroll (Social Security/Medicare) tax. It applies on top of the standard deduction.
  • Only FLSA-required overtime and tips from customarily tipped occupations qualify. In effect 2025-2028. Confirm details with the IRS.

How it works

  1. Choose your filing status and enter your modified AGI.
  2. Enter your hourly wage and overtime hours.
  3. Enter your qualified tips for the year.
  4. Read your deduction, the phase-out and the estimated tax savings.

What the deductions cover

For 2025 through 2028, qualified tips and the premium half of FLSA-required overtime can be deducted from federal taxable income, up to annual caps, whether or not you itemize. The deduction phases out at higher incomes.

Only the premium counts

For time-and-a-half, only the extra half is deductible, not the whole overtime paycheck. This calculator figures that portion from your wage and overtime hours.

Frequently asked questions

Does this reduce payroll taxes?

No. It lowers federal income tax only; Social Security and Medicare taxes still apply.

Which tips qualify?

Voluntary tips in occupations that customarily receive them. Rules and lists come from the IRS.

Are the caps editable?

Yes. Caps and phase-out start are editable in case the rules change.

Is this tax advice?

No. It is an estimate. Confirm with the IRS or a tax professional.