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How to Find Qualified Overtime and Tips on Your W-2

The deduction only counts the "half" premium in time-and-a-half — not your full overtime wage. Here's where that number actually lives.

Updated 30 Sept 2026

From tax year 2026 onward, employers report qualified overtime compensation in Box 12 of Form W-2 using code TT. For 2025, reporting it separately wasn't mandatory, so some employers used Box 14 instead, usually labelled something like "Qualified overtime."

What does this mean for you? Work out your own number: No tax on overtime calculator

The overtime deduction only covers one specific slice of your overtime pay: the “half” in time-and-a-half, not the whole time-and-a-half wage. If you earned $30/hour regular and $45/hour on overtime, the deductible part is the $15/hour premium — the extra half — not the full $45. Finding that number depends on which tax year you’re looking at.

Tax year 2026 and later: Box 12, code TT

Starting with the 2026 tax year (the return you’ll file in early 2027), employers are required to report the year’s total qualified overtime compensation separately, in Box 12 of Form W-2 with code TT. Box 12 already carries several other codes for things like 401(k) contributions and HSA amounts — code TT is the new one for this deduction.

If your W-2 has a Box 12 entry marked TT, that figure is exactly what goes on your Schedule 1-A. Nothing to calculate.

The other new boxes on the 2026 W-2

The 2026 form has two more changes for the tips deduction, next to code TT:

Where What it reports
Box 12, code TT Qualified overtime — the premium half of FLSA overtime, for the whole year
Box 12, code TP Qualified tips — cash and card tips you reported to your employer, including shared tips, but not mandatory service charges
Box 14b Your Treasury Tipped Occupation Code (TTOC) — a three-digit code for the tipped job, up to two codes. 000 means the job isn’t on Treasury’s list

None of these reduce Box 1. Your full wages, overtime and tips are still in Box 1 and still taxed there; the Box 12 amounts are what you can then deduct on Schedule 1-A.

A code TP amount with 000 in Box 14b means your employer says the job isn’t a qualifying tipped occupation, so the tips deduction doesn’t apply to those tips. See which jobs qualify. If you have code TP and a real code in Box 14b, the no tax on tips calculator shows what the deduction is worth.

If code TT is missing or looks wrong

For 2026, employers have to report qualified overtime in Box 12. If you worked FLSA overtime and there is no code TT, or the amount looks too high or too low:

  1. Compare it with your last pay stub of the year. Code TT should be close to your overtime hours times half your regular rate.
  2. Ask payroll whether the figure includes the full overtime wage instead of just the premium — the most likely mistake, since the full amount is the number payroll systems usually track.
  3. Ask for a corrected W-2 (Form W-2c). Don’t file with a figure you know is wrong; the IRS matches Box 12 against your return.

Tax year 2025: check Box 14, or ask payroll

For 2025, the IRS gave employers a transition year — separately reporting the overtime premium wasn’t mandatory. Many did anyway, usually in Box 14 (“Other”), labelled something like “Qualified overtime” or “OT premium.” If yours doesn’t have that:

  1. Check your final pay stub of the year for a year-to-date overtime breakdown. Some payroll systems separate “overtime premium” from “overtime pay” as distinct line items.
  2. Ask your payroll or HR department directly — many kept internal records even without printing the figure on the W-2 itself.
  3. If neither works, calculate it: total your overtime hours for the year, multiply by half your regular hourly rate for those hours (not your full overtime rate). That’s the premium.

Once you have that premium figure, the no-tax-on-overtime calculator turns it into the deduction you can actually claim at your income — including the point where the phase-out starts shrinking it.

Double time and daily overtime

The deduction only counts the premium the FLSA requires: half your regular rate, for hours over 40 in a workweek. Anything beyond that isn’t qualified overtime, even though it’s real overtime pay.

  • Double time. If you’re paid 2× for some hours, only 0.5× of your regular rate for the FLSA overtime hours counts, not the full 1× extra.
  • Daily overtime. California and a few other states require overtime for long days even when the week stays under 40 hours. Those hours aren’t FLSA overtime, so their premium isn’t qualified.

What doesn’t count, even if your job calls it “overtime”

Only overtime required under Section 7 of the Fair Labor Standards Act (FLSA) qualifies. Overtime paid because a union contract, state law, or your employer’s own policy is more generous than FLSA requires isn’t qualified overtime compensation for this deduction — even though it shows up as “overtime” on your pay stub. If you’re covered by a collective bargaining agreement with overtime terms beyond the federal minimum, the qualifying amount is only the FLSA-required portion, not everything your contract pays.

If you’re salaried and exempt from overtime

This deduction doesn’t apply to you. FLSA-exempt employees (most salaried professional, executive and administrative roles) aren’t entitled to Section 7 overtime pay in the first place, so there’s no qualified overtime compensation to report or deduct.

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