W-2 paychecks & overtime

No tax on overtime (2025–2028)

Last verified: 2 min read Rule card + research brief
Printable checklists
Which part of overtime countsA time-and-a-half overtime hour split into the regular rate and the FLSA-required premium (0.5 times the regular rate). Only the premium half counts toward the deduction, for 2025 through 2028, capped at $12,500 ($25,000 married filing jointly). Overtime is still subject to Social Security and Medicare.One overtime hour at time-and-a-halfRegular rate+ 0.5 premiumThis half counts2025–2028 · cap $12,500 ($25,000 MFJ) · from 2026, shown on W-2 box 12, code TT.Still subject to Social Security and Medicare.
Which part of overtime counts

The rule (settled)

  • For 2025–2028, you can deduct the FLSA-required premium part of overtime pay. That's the "half" of time-and-a-half: up to 0.5 × your FLSA regular rate per overtime hour.
  • Cap: $12,500 ($25,000 married filing jointly).
  • Phase-out: the deduction drops by $100 for each full $1,000 of modified AGI over $150,000 ($300,000 MFJ). Based on Schedule 1-A (2025); re-check the 2026 form.
  • You can take it whether or not you itemize. Married couples must file jointly, and you need a valid SSN.
  • Overtime is still subject to Social Security and Medicare.
  • From 2026, employers report it on W-2 box 12, code TT, and you may use only that amount, or a W-2c (FS-2026-13 Q19–Q22).

What counts

  • Hours over 40 in a workweek, or your hospital's FLSA 8/80 overtime. With 8/80, use the premium actually paid under that system (FS-2026-13 Q17).
  • Not counted: overtime that only your contract, policy, or union agreement requires, beyond what the FLSA requires. Examples are double time (only the half counts, FS-2026-13 Q16) and holiday premiums.
  • Your regular rate includes most shift differentials and non-discretionary bonuses (FS-2026-13 Q15; DOL #56A).

What it means for you

  • Log overtime weekly.
  • In January, compare your log with code TT. If code TT is low, ask for a W-2c.
  • 2025: check whether you claimed it. If not, consider amending with Form 1040-X (generally within 3 years). There was no code TT for 2025; Notice 2025-69 explains the self-calculation methods.

Gray areas

  • 8/80 edge cases, and whether travel per diem belongs in the regular rate.

Go deeper

  • Overtime paid only because of a contract, CBA, or employer policy (e.g., daily overtime over 8 or 12 hours that the FLSA doesn't require, double time beyond 1.5×, holiday premiums) is not qualified. If the employer pays 2×, only the 0.5× needed to satisfy the FLSA qualifies. (FS-2026-13 Q1/A1, Q16)
  • Independent contractors generally don't get FLSA overtime, so there's no deduction unless they are an FLSA employee misclassified for tax purposes ("rare"). (FS-2026-13 Q7)
  • Hourly RNs are generally FLSA overtime-eligible. (DOL Fact Sheet #17N)

What to keep

  • Pay stubs showing overtime hours and ratesFrom: Nurse tax brief §5
  • A weekly overtime logFrom: Overtime card
  • Your 2026 W-2 box 12 code TT. If the employer omitted or understated it, request a W-2c. (FS-2026-13 Q22)From: Nurse tax brief §5

Sources

Research, not tax advice. Confirm with a CPA or EA before filing.