Not tax advice. This is general information, not tax advice. Tax Break Math is not a tax preparer, CPA or law firm. Your situation may differ; confirm with the IRS instructions or a qualified tax professional.
What Counts as Qualified Overtime (and What Does Not)
Based on IRS FS-2026-13 (August 2026) and the IRS release IR-2026-88 (Aug. 6, 2026), read 2026-10-26. We have not tested anything hands-on; this page summarizes IRS text and links to it.
Short version: the deduction is not for your whole overtime paycheck. The IRS says qualified overtime is overtime required by section 7 of the federal Fair Labor Standards Act (FLSA) "that is in excess of the employee's regular rate", which for ordinary time-and-a-half means the extra half.
The one rule that trips people up
The IRS formula for most employees, for each workweek (FS-2026-13, Q12):
Number of FLSA hours worked in excess of 40 hours in a workweek x One-half x Employee's FLSA regular rate of pay = Qualified overtime compensation for workweek
Example from the IRS (Q16): a worker earning $20 an hour works 50 hours in a week and the employer pays double time. The employer pays $400 for the 10 overtime hours, but only $300 was required by the FLSA, so the qualified overtime compensation is $100, "the 'half' amount in the required one and one-half times."
Worked the same way: 10 hours x one-half x $20 = $100. The straight-time part ($200) and the extra the employer paid beyond what the FLSA requires are not counted.
What the IRS says does not count
Overtime the FLSA does not require. The IRS (Q16) lists examples: pay "pursuant to a State law, or under a collective bargaining agreement with a labor union," or a premium "for different hours (e.g., for hours beyond 8 on a workday, for hours beyond 35 in a workweek, for hours on a weekend or holiday, etc.)". Only the amount "minimally necessary to satisfy 29 USC ยง 207" is qualified.
Workers exempt from FLSA overtime. Q4: someone who is FLSA overtime-ineligible "does not receive qualified overtime compensation regardless of other laws or circumstances (such as a collective bargaining agreement) providing for overtime pay." The IRS lists common exemptions, including executive, administrative and professional employees and outside sales employees. Q5: an employee who owns at least a bona fide 20-percent equity interest and is actively engaged in management is generally not FLSA overtime-eligible.
Averaging weeks. Q13: "each workweek stands alone; for purposes of overtime there can be no averaging of hours over 2 or more workweeks."
A few groups have their own FLSA rules (hospital and residential care, fire and law enforcement, state and local government comp time, many federal employees). The IRS covers them in Q17, Q18 and Q26-Q30; this site's calculator does not model them. If that is you, use your W-2 box 12 code TT amount and the IRS text.
Where the number comes from: W-2 box 12, code TT
For 2026, employers must report qualified overtime on Form W-2, box 12, code TT (Q10). The IRS (Q20): "for tax years after 2025, employees may not consider any amount of qualified overtime compensation in excess of what is reported on Form(s) W-2, box 12, code TT in determining their deduction." If you think it is wrong, you must ask the employer for a corrected W-2c (Q22); a substitute Form 4852 does not work (Q23). The amount in code TT can exceed the cap, because "due to other limitations, [it] may not be the amount ultimately deductible" (Q10).
The limits, in the IRS's words
"up to $12,500 ... per individual tax return ($25,000 in the case of a joint return)" (Q2).
Reduced if MAGI "exceeds $150,000 ($300,000 for joint filers)" (Q2). On Schedule 1-A the reduction is $100 for each full $1,000 over the threshold, so a full $12,500 deduction reaches zero at $275,000 (single) and $25,000 reaches zero at $550,000 (joint).
Available "whether the individual itemizes or takes the standard deduction" (Q1).
A valid Social Security number is required (Q24), and if you are married you must file jointly (Q25).
It is a deduction, not an exclusion: "Generally, overtime compensation is not excludible or exempted from wages for purposes of employment taxes including income tax withholding, social security, and federal unemployment taxes" (Q1). Employers generally do not reduce withholding unless you give them an updated Form W-4 (Q8, Q9).
The IRS news release IR-2026-10 (Jan. 23, 2026) says the deduction applies "for tax years 2025 through 2028". Our calculator is built for the 2026 return and the 2026 W-2 reporting rules.
Open the calculator. It outputs the deductible amount only; it does not estimate a refund.