The no tax on overtime deduction doesn't cover every overtime dollar. It covers qualified overtime compensation: the premium that section 7 of the Fair Labor Standards Act (FLSA) requires your employer to pay for hours over 40 in a workweek. In time-and-a-half pay, that's the “half”.
What counts and what doesn't
| Type of pay | Qualifies? | Why |
|---|---|---|
| Time-and-a-half for hours over 40 in a week | Yes, the extra half | Required by FLSA section 7 |
| The “straight-time” part of overtime pay | No | It's your regular rate, not the premium |
| Daily overtime (e.g., over 8 hours in a day) required only by state law | No | Required by state law, not the FLSA |
| Overtime required only by a union contract | No | Contractual, not FLSA-required |
| Double time | Only the FLSA half-time part | The rest is above what the FLSA requires |
| Holiday, weekend or Sunday premiums | Generally no | The FLSA doesn't require them, unless the hours are also over 40 in the week |
| Overtime paid to an FLSA-exempt employee | No | The FLSA doesn't require overtime for exempt work |
| Shift differentials, bonuses, on-call pay | No on their own | They can raise your regular rate, which raises the premium on qualifying hours |
Who usually qualifies
Most hourly workers covered by the FLSA: warehouse and factory workers, retail and restaurant staff, hourly nurses and medical technicians, construction and trades workers, security guards, call-center agents, and many state and local government employees. Salaried workers can qualify too if their job isn't exempt, for example if they earn under the FLSA salary threshold or don't meet the duties tests.
Who usually doesn't
- Exempt salaried employees such as most managers, administrators and professionals. Any “overtime” they're paid is voluntary, not FLSA-required.
- Many agricultural workers, because farm work is largely exempt from FLSA overtime.
- Interstate truck drivers covered by the Motor Carrier Act exemption. Their employers don't have to pay FLSA overtime, so overtime they receive generally isn't qualified.
- Independent contractors paid a flat rate. The FLSA overtime rules apply to employees; a payer who reports qualified overtime to a contractor does so on Form 1099.
Federal employees: check block 35 (“FLSA Category”) of your Form SF-50. “N” means nonexempt, so your FLSA overtime premium qualifies. “E” means exempt.
How to work out the amount
Tax year 2026 and later
Use the amount your employer reports in W-2 box 12, code TT. Under the IRS's August 2026 FAQs you generally can't deduct more than what's reported there. If it's missing or wrong, ask for a corrected W-2c.
Tax year 2025
Employers didn't have to report it separately. If your overtime was all paid at time-and-a-half, the IRS lets you take your total overtime pay and divide by 3. Example: $9,000 of overtime pay ÷ 3 = $3,000 qualified premium. If some was double time or state daily overtime, only count the FLSA half-time portion for hours over 40.
A worked example with double time
Ana earns $24 an hour. One week she works 48 hours, and her employer pays double time for the last 8 because of a union contract. Her overtime pay is 8 × $48 = $384. The FLSA only requires 8 × $36 = $288, of which the premium is 8 × $12 = $96. That $96 is the qualified part; the other $288 is regular-rate pay plus a contractual extra.
Ready for your number? The no tax on overtime calculator accepts your code TT amount, your hours, or your total time-and-a-half pay.
Common questions
Does California daily overtime qualify?
Only the part that's also required by the FLSA. Hours over 8 in a day that don't push you over 40 hours in the week are state-law overtime and don't count.
Does double time count?
Only the FLSA-required half-time premium for hours over 40 in the week. The extra amount paid because of a contract or state law doesn't qualify.
I'm salaried. Can I claim overtime?
Only if your job is nonexempt under the FLSA, meaning you're legally owed overtime. Exempt salaried employees can't claim overtime they're paid voluntarily.
Does holiday pay count as overtime?
Generally no. The FLSA doesn't require extra pay for holidays or weekends. Only hours over 40 in the workweek create FLSA overtime.
Where do I find my qualified overtime for 2026?
On your W-2, box 12, code TT. For 2026 and later, that reported amount generally limits what you can deduct.
Sources
- IRS FS-2025-03: Tax deductions for working Americans and seniors
- IRS: Schedule 1-A and instructions
- U.S. Department of Labor: Overtime pay under the FLSA
- PwC summary of IRS Fact Sheet 2026-13 (overtime FAQs, Aug. 6, 2026)
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