What is the income limit for no tax on overtime?

There is no hard limit. The deduction is reduced by $100 for every full $1,000 of modified AGI above $150,000, or $300,000 on a joint return.

At what income does it reach zero?

At the full cap, $275,000 single and $550,000 joint. Claiming less than the cap brings those points down, since the same reduction eats a smaller amount.

Is the phase-out based on AGI or taxable income?

Modified AGI, which is AGI increased by amounts excluded under sections 911, 931 and 933. The deduction itself does not reduce it.

Can a 401(k) contribution help me stay under the threshold?

Yes. A traditional 401(k) deferral reduces AGI, so it can lower modified AGI. The overtime deduction cannot, because it works below the AGI line.

No tax on overtime income limit

The deduction does not stop at a cliff. It is ground down $100 at a time, and where it reaches zero depends on how much you were claiming.

How the reduction is worked out

Take your modified AGI, subtract $150,000 (or $300,000 on a joint return), divide what is left by $1,000 and round down to a whole number, then multiply by $100. That is the reduction, and it comes off the amount you were otherwise claiming.

The rounding is not a detail. At $151,900 of MAGI the excess is $1,900, which rounds down to 1, so the reduction is $100 and not $190.

MAGI, single	Reduction	Deduction left	MAGI, joint	Deduction left
$150,000	$0	$12,500	$300,000	$25,000
$160,000	$1,000	$11,500	$310,000	$24,000
$180,000	$3,000	$9,500	$330,000	$22,000
$200,000	$5,000	$7,500	$350,000	$20,000
$240,000	$9,000	$3,500	$390,000	$16,000
$275,000	$12,500	$0	$425,000	$12,500

Assumes qualified overtime at or above the cap. With less than the cap the deduction runs out sooner.

Zero arrives earlier than the headline suggests

The often-quoted figures, $275,000 single and $550,000 joint, assume you are claiming the full cap. The reduction runs against what you actually claim, so a smaller deduction is wiped out sooner.

Amount claimed before phase-out	Zero at MAGI, single	Zero at MAGI, joint
$2,000	$170,000	$340,000
$4,000	$190,000	$380,000
$6,000	$210,000	$420,000
$9,000	$240,000	$480,000
$12,500	$275,000	$550,000

Someone with $4,000 of qualified overtime loses it entirely at $190,000 of MAGI, a full $85,000 below the number usually quoted.

The deduction cannot rescue itself

Because it is allowed under section 63(b) rather than section 62, it reduces taxable income but not adjusted gross income. Modified AGI is therefore unaffected by claiming it, so it cannot pull you back under the threshold.

Things that genuinely do reduce AGI, such as a traditional 401(k) deferral or an HSA contribution, can. That is the practical lever if you are sitting just above the line.

Common questions

What is the income limit for no tax on overtime?: There is no hard limit. The deduction is reduced by $100 for every full $1,000 of modified AGI above $150,000, or $300,000 on a joint return.
At what income does it reach zero?: At the full cap, $275,000 single and $550,000 joint. Claiming less than the cap brings those points down, since the same reduction eats a smaller amount.
Is the phase-out based on AGI or taxable income?: Modified AGI, which is AGI increased by amounts excluded under sections 911, 931 and 933. The deduction itself does not reduce it.
Can a 401(k) contribution help me stay under the threshold?: Yes. A traditional 401(k) deferral reduces AGI, so it can lower modified AGI. The overtime deduction cannot, because it works below the AGI line.