Millions of hourly workers qualify for the No Tax on Overtime deduction under the One Big Beautiful Bill Act (OBBBA), but many don't know where on their tax return to claim it. The answer is Schedule 1-A of Form 1040, which flows to Line 10 of the main 1040 form as an above-the-line deduction to income.
This guide explains what "above the line" means, walks through six steps for paper filers, and shows exactly where to click in TurboTax, FreeTaxUSA, TaxSlayer, and H&R Block. Before you file, use our free overtime tax calculator to confirm your deduction amount — you'll need that number when you reach the relevant line on Schedule 1-A.
Schedule 1-A — The Short Answer
The OBBBA overtime deduction is an above-the-line deduction, which means it reduces your Adjusted Gross Income (AGI) directly — before you even get to the standard or itemized deduction. This is the best kind of deduction for most taxpayers because:
- You do not need to itemize to benefit — you can take the standard deduction and the overtime deduction simultaneously.
- A lower AGI can also reduce your exposure to other income-based phase-outs and surtaxes.
- It appears on Schedule 1-A, which attaches to Form 1040 and feeds into Line 10 ("Other Adjustments").
Step-by-Step Filing on Paper
If you're filing a paper return or just want to understand exactly what happens, here are the six steps from W-2 to Form 1040:
- Gather your W-2 and pay stubs. Look for your overtime premium in W-2 Box 14 (voluntary in 2025) or Box 12 Code TT (mandatory starting 2026). If not listed, calculate from pay stubs: regular rate × 0.5 × total annual FLSA overtime hours.
- Calculate your qualifying overtime premium. Use the formula or our calculator. Apply the cap ($12,500 single / $25,000 MFJ) and reduce for any phase-out if your MAGI is above $150,000 (single) or $300,000 (MFJ).
- Complete Schedule 1-A. Find the line for "Qualified Overtime Compensation Deduction (IRC §225)" and enter your calculated deduction amount.
- Transfer the total to Form 1040. The total from Schedule 1-A flows to Line 10 of Form 1040 as "Other Adjustments to Income."
- Subtract from gross income. Form 1040 Line 11 (Adjusted Gross Income) is your total income minus Line 10. The overtime deduction reduces your AGI dollar-for-dollar.
- Apply standard or itemized deduction as usual. From Line 11 (AGI), subtract your standard deduction or itemized deductions as usual to arrive at taxable income. Your overtime deduction has already reduced AGI at this point.
How to Enter It in Tax Software
Most major tax software platforms added support for the OBBBA overtime deduction in their 2025 tax year releases. Here's where to find it in each platform:
TurboTax
Federal > Deductions & Credits > search "overtime deduction" or "Schedule 1-A." Alternatively, look under "Other Tax Situations" > "Other Adjustments to Income." See our dedicated TurboTax step-by-step guide.
FreeTaxUSA
Deductions > Adjustments to Income > "Overtime Compensation Deduction (OBBBA)." FreeTaxUSA is free for federal returns and fully supports the above-the-line overtime deduction.
TaxSlayer
Federal Section > Adjustments > "Other Adjustments" > "Qualified Overtime Compensation." TaxSlayer Classic and above support Schedule 1-A adjustments.
H&R Block
Federal > Income > Wages & Salary > then follow the "Overtime Deduction" interview question, or go to Deductions > Other Adjustments to Income and enter the overtime premium amount with a description of "IRC §225."
What Number Do I Enter?
This is where many workers go wrong. The number you enter on Schedule 1-A is not your total overtime pay. It is only the overtime premium — the 0.5× portion above your regular rate.
For time-and-a-half overtime, the quick shortcut is: total overtime pay ÷ 3 = deductible premium. This works because the premium is exactly one-third of time-and-a-half pay (regular rate × 0.5 out of regular rate × 1.5). For double-time, the formula is different — see our full calculation guide.
If your W-2 Box 14 shows a code like "OTP," "OT PREM," "OBBBA," or similar, use that number directly — your employer has already calculated the premium for you. Starting with tax year 2026, employers must report it in Box 12 Code TT, which will make it even easier to find the correct number.
Common Filing Mistakes to Avoid
- Entering total overtime pay instead of the premium. At $30/hr with 200 annual OT hours, total OT pay is $9,000 but the deductible premium is only $3,000. Always use the 0.5× premium amount.
- Including state-only daily overtime hours. Workers in California, Alaska, and Nevada may receive daily overtime (hours 9–12 in a day), but for this federal deduction only hours that push your weekly total above 40 count.
- Filing as Married Filing Separately and trying to claim it. MFS filers are completely ineligible under OBBBA. The deduction is $0 for MFS regardless of overtime worked.
- Forgetting the phase-out. If your MAGI is above $150,000 (single) or $300,000 (MFJ), your deduction may be reduced. Our calculator handles this automatically.
- Not checking for an amended return if you already filed. If you filed your 2025 return without claiming the deduction, you can file Form 1040-X to amend and claim what you missed.
Get Your Exact Deduction Amount First
Before you open your tax software, use our free calculator to confirm the correct number to enter on Schedule 1-A.
Calculate My Deduction →Frequently Asked Questions
Where is the overtime deduction in TurboTax?
Go to Federal > Deductions & Credits and search for "overtime deduction" in the search bar. You can also navigate to "Other Tax Situations" > "Other Adjustments to Income." For a complete walkthrough, see our TurboTax guide. Make sure to enter only the 0.5× premium amount — not your full overtime pay.
Is this an above-the-line or below-the-line deduction?
Above the line. The OBBBA overtime deduction is claimed on Schedule 1-A and reduces your Adjusted Gross Income (AGI) on Form 1040 Line 10/11. This means you do not need to itemize — you can take the standard deduction and the overtime deduction at the same time. This is more advantageous than a below-the-line (itemized) deduction for most workers.
Can I e-file my return with the overtime deduction claimed?
Yes. All major e-file platforms support the OBBBA overtime deduction on Schedule 1-A. E-filing is recommended because it's faster, reduces errors, and processes refunds in as little as 21 days (vs. 6-8 weeks for paper returns). IRS Free File also supports it for eligible taxpayers.
What if my tax software doesn't have a specific field for it?
Tax software is updated frequently. If you can't find a dedicated overtime deduction field, navigate to "Other Adjustments to Income" (the name varies by platform) and enter your premium amount with the description "Qualified Overtime Compensation — IRC §225." This will populate the correct line on Schedule 1-A. When in doubt, check for software updates or consult the platform's help documentation.
Do I need to attach my W-2 or any documentation?
When e-filing, your W-2 data is transmitted electronically as part of the return — no separate attachment is required. When filing on paper, attach all W-2 forms as usual. If your employer did not report the overtime premium in Box 14 (2025) or Box 12 Code TT (2026+), keep your pay stubs and any calculation worksheets as documentation per IRS Notice 2025-69 in case of audit.