Qualified overtime eligibility
The federal deduction is narrower than ordinary overtime pay. It starts with overtime required by section 7 of the Fair Labor Standards Act, then applies tax-return and reporting conditions under Internal Revenue Code section 225.
This is a federal tax-planning guide, not a determination of FLSA status or tax eligibility. Job duties, employer coverage, exemptions, the applicable overtime rule, filing status, and the furnished tax statement all matter.
| Eligibility check | 2026 rule | What to verify |
|---|---|---|
| FLSA overtime status | The worker must receive overtime required under FLSA section 7. | Coverage, nonexempt status, and the FLSA rule that required the premium. |
| Qualified amount | Only pay above the regular rate that the FLSA requires can qualify. | Do not use the entire time-and-a-half payment. |
| 2026 reporting | The properly furnished statement must separately report qualified overtime. | For most employees, check Form W-2 box 12, code TT. |
| Return requirements | A valid work-authorized SSN is required; married taxpayers generally must file jointly. | Confirm SSN and filing status before estimating the deduction. |
A nurse, technician, driver, public employee, or office worker does not qualify merely because the employer calls pay "overtime." The payment must be required under the applicable FLSA overtime provision. Overtime paid only under a state rule, collective bargaining agreement, or employer policy does not qualify unless the FLSA also requires it.
The common federal rule requires covered nonexempt employees to receive at least one and one-half times the regular rate for hours above 40 in a workweek. Exempt employees and workers outside the applicable FLSA overtime requirement cannot convert an employer premium into qualified compensation.
The 2025 transition methods were temporary. For 2026, the amount properly reported by the employer or payor controls the claim. A worker should request a corrected Form W-2c if code TT is wrong instead of estimating an omitted amount independently.
First identify the FLSA rule that required overtime. Next separate the required premium from straight-time pay and any extra contractual premium. Then compare that amount with the 2026 information statement. Finally apply the annual cap, MAGI phaseout, filing-status rule, and SSN requirement on the tax return.
The deduction is available to taxpayers who itemize and those who take the standard deduction. It applies for tax years 2025 through 2028 under the current statute, so a 2026 estimate should not be projected into 2029.
Sources: IRS FS-2026-13, 26 USC Section 225, DOL Fact Sheet #23, and 29 CFR Part 778. Last reviewed 2026-08-16.