How much overtime should I enter for the overtime deduction?
Qualified overtime must be paid to a covered, nonexempt employee under the Fair Labor Standards Act (FLSA). Your employer should be able to tell you if you're a covered, nonexempt employee.
You should enter the "half" amount of the "time-and-a-half" overtime income. For 2025, you'll need to sort out that "half" amount going back to the start of the year.
For example: Let's say your normal wage is $10 an hour. Your overtime at time-and-a-half would be $15 per hour. That means $5 per hour of overtime could be deducted. You'd then multiply that $5 by the total number of overtime hours you worked in the year. So if you worked 100 hours of overtime with $5 of overtime pay per hour, you'd enter $500 as overtime compensation.
Some W-2 employees may see their overtime reported in Box 14 if the employer had time to implement this change for the 2025 tax year.
Who doesn't qualify?
You should enter the "half" amount of the "time-and-a-half" overtime income. For 2025, you'll need to sort out that "half" amount going back to the start of the year.
For example: Let's say your normal wage is $10 an hour. Your overtime at time-and-a-half would be $15 per hour. That means $5 per hour of overtime could be deducted. You'd then multiply that $5 by the total number of overtime hours you worked in the year. So if you worked 100 hours of overtime with $5 of overtime pay per hour, you'd enter $500 as overtime compensation.
Some W-2 employees may see their overtime reported in Box 14 if the employer had time to implement this change for the 2025 tax year.
Who doesn't qualify?
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The overtime deduction uses the Fair Labor Standards Act to determine overtime. That act determines who qualifies. So, railroad and some highly compensated workers are excluded. Also, overtime doesn't start at the same number of hours for all workers. For example, firefighters would work on average 53 hours per week before earning overtime.
If you're in a union and covered by a collective bargaining agreement, you may start getting overtime pay before the number of hours in the Fair Labor Standards Act. However, for this deduction, you'd only count overtime hours based on the Fair Labor Standards Act.
For example, a firefighter may belong to a union that negotiated overtime pay to start at a lower number of hours. But in most cases, the overtime that counts for the overtime tax deduction would still only begin at 53 hours. - Premium Pay. Some employers might pay more than "time-and-a -half" overtime pay. Any amount more than the "half" extra doesn't qualify.
- Payment for certain shifts. Some employers may pay more for certain shifts, weekends, or holidays even if the employee doesn't work more than 40 hours in a given work week. Extra pay for certain shifts only qualifies if the employee works more than 40 hours in the work week.
- Qualified tips. Qualified overtime doesn't include any amount you received as a qualified tip.
- Coverage under state rules. Employees who are not covered under FLSA requirements but are covered under state rules are not eligible for the overtime deduction.
