Updated November 5, 2026. Quick answer: Part III of Schedule 1-A figures the 2025 deduction for qualified overtime compensation, which is only the extra “half” of time-and-a-half that the Fair Labor Standards Act requires, not the whole overtime pay. Lines 14a to 14c collect it, line 15 caps it at $12,500 ($25,000 if married filing jointly), and lines 16 to 21 reduce it by $100 for every full $1,000 of MAGI over $150,000 ($300,000 joint).
For what changed on the 2026 draft of the schedule, see Schedule 1-A 2026 changes.
Who fills out Part III
The schedule says “Fill out Part III only if you received qualified overtime compensation.” The Instructions list the conditions: “You (and/or your spouse if filing a joint return) received qualified overtime compensation in 2025; and” “You have a valid social security number (SSN).” “If you are married, you must file a joint return with your spouse to claim this deduction.” The cap: “You can’t deduct more than $12,500 ($25,000 if married filing jointly) of qualified overtime compensation.” For a couple, “the $25,000 maximum amount of deduction limit applies to your combined overtime compensation. It is not a per spouse limit.”
What counts as qualified overtime
The definition is narrow: “Qualified overtime compensation means overtime compensation that is paid to you as required under section 7 of the Fair Labor Standards Act of 1938 (FLSA) that is more than the amount of your regular rate of pay.” In practice, “This generally means the “half” portion of “time-and-a-half” compensation that is required by the FLSA.” You must be covered by the Act: “you must (among other requirements) be covered by and not exempt from the FLSA (an FLSA-eligible employee).” The Instructions list four things that are not qualified overtime: premium pay above time-and-a-half, extra pay for weekends and holidays without 40 hours, any amount received as a qualified tip, and overtime paid to an FLSA-ineligible employee under state law. Tips and overtime are separate parts, so one dollar does not appear in both.
Lines 14a to 15: the compensation you report
| Line | What it asks |
|---|---|
| 14a | “Qualified overtime compensation included in Form W-2, box 1. If you received qualified overtime compensation not reported on Form W-2, box 1, see instructions” |
| 14b | “Qualified overtime compensation included in Form 1099-NEC, box 1, or Form 1099-MISC, box 3” |
| 14c | “Add lines 14a and 14b” |
| 15 | “Enter the smaller of the amount on line 14c or $12,500 ($25,000 if married filing jointly)” |
With more than one employer the Instructions send you to the more-than-one-employer worksheet and, for 1099 payors, the more-than-one-payor worksheet. The 1099 side of the reporting is on the 1099-NEC box page. Enter only the overtime part: “Enter on line 14a only the qualified overtime compensation amount that is included on Form W-2.”
How to find the amount when the W-2 does not show it
For 2025 the forms did not change, so “a separate accounting may not appear on your Form W-2, Form 1099-NEC, or Form 1099-MISC.” Some employers use W-2 box 14. If not, the Instructions allow five methods. Two of them: “you can divide the total amount by three (3) and use the result when figuring your qualified overtime compensation.” when a statement shows the premium and regular wages together, and, for a statement that shows the premium separately, “you can use the FLSA Overtime Premium that is separately shown”. The last resort is “you can use a reasonable method to figure the amount of your qualified overtime compensation”, based on the regular rate and the hours over 40 a week. The Instructions’ Example 1 is the one the illustration below uses: “You can include $5,000 of your wages for the overtime hours when figuring your deduction for qualified overtime compensation. The $5,000 is the “half” portion of “time-and-a-half” ($15,000 divided by 3).”
Lines 16 to 21: the income reduction
| Line | What it asks |
|---|---|
| 16 | “Enter the amount from line 3” |
| 17 | “Enter $150,000 ($300,000 if married filing jointly)” |
| 18 | “Subtract line 17 from line 16. If zero or less, enter the amount from line 15 on line 21” |
| 19 | “Divide line 18 by $1,000. If the resulting number isn’t a whole number, decrease the result to the next lower whole number.” |
| 20 | “Multiply line 19 by $100” |
| 21 | “Qualified overtime compensation deduction. Subtract line 20 from line 15. If zero or less, enter -0-” |
Same mechanics as Part II, only the cap differs. The Instructions note “If the amount on line 18 is zero or less, your deduction for your qualified overtime compensation is not reduced.”
Example with invented numbers
Illustration, not an IRS example. The taxpayer from the Part I page: single, MAGI $162,500, and the Instructions’ own $15,000 paid for overtime hours, of which $5,000 is qualified under the divide-by-three method.
| Line | Entry | Amount |
|---|---|---|
| 14a | Qualified overtime in Form W-2, box 1: a third of $15,000 paid for overtime hours (computed) | $5,000 |
| 14b | Qualified overtime in Form 1099-NEC or 1099-MISC | $0 |
| 14c | Add lines 14a and 14b (computed) | $5,000 |
| 15 | Smaller of line 14c or $12,500 (computed) | $5,000 |
| 16 | MAGI from line 3 (Part I illustration) | $162,500 |
| 17 | Single filer | $150,000 |
| 18 | Line 16 minus line 17 (computed) | $12,500 |
| 19 | Line 18 divided by $1,000, rounded down (computed) | 12 |
| 20 | Line 19 times $100 (computed) | $1,200 |
| 21 | Line 15 minus line 20 (computed) | $3,800 |
The deduction is $3,800. The cap is not what limits it here; the $1,200 income reduction is.
A married couple filing jointly with $30,000 of qualified overtime and a MAGI of $100,000 has $30,000 on line 14c, but line 15 is the smaller of that or $25,000, so $25,000; their MAGI is under $300,000, so the deduction is $25,000 (computed).
Edition
This page reads Schedule 1-A (Form 1040) for 2025 and the Instructions for Form 1040 (2025), the files irs.gov served on 2026-11-05 (sha256 in the kit data). Line numbers belong to that edition, so check the label printed on the schedule in your own copy before you follow a line reference.
Common mistakes
- Entering the whole overtime pay instead of the premium half. At time-and-a-half the qualified part is a third of the overtime pay, per the Instructions’ method.
- Including double-time or holiday premiums above time-and-a-half, which the Instructions exclude.
- Claiming overtime that state law, rather than the FLSA, requires for an employee who is not FLSA-eligible.
- Putting the same pay in Part III and as a qualified tip in Part II.
- Forgetting that a married filer must file jointly; the cap is $25,000 combined, not per spouse.
Related: Schedule 1-A overview, overtime deduction 2026, overtime from more than one employer, and 1099-MISC boxes 13a to 14.
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Answer againSources
- Schedule 1-A (Form 1040), Additional Deductions (2025): https://www.irs.gov/pub/irs-pdf/f1040s1a.pdf
- Instructions for Form 1040 (2025), including the Instructions for Schedule 1-A: https://www.irs.gov/pub/irs-pdf/i1040gi.pdf
Read from the IRS documents linked above on November 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.