What Counts as Qualified Overtime? Premium-Pay Checker (2026)
Enter your pay and hours to see the exact premium portion of your overtime that qualifies — and what doesn't.
Only the 'premium' half of your overtime qualifies — the extra 0.5× above your regular rate that makes overtime 'time-and-a-half' under the Fair Labor Standards Act (FLSA). If you earn $20/hour and $30/hour for overtime, only the $10 premium per overtime hour counts, not the full $30. Bonuses, shift differentials, and contractual overtime that isn't FLSA-required don't qualify.
The No Tax on Overtime deduction is widely misunderstood. Workers assume their whole overtime paycheck becomes tax-free — it doesn't. The law only lets you deduct the FLSA overtime premium: the extra half-time above your regular hourly rate. The base portion of overtime pay (your regular rate for those hours) is still taxed normally.
The checker below turns your regular rate, overtime rate, and overtime hours into the exact qualifying premium, then caps it and previews the deduction. Use it to avoid the single most common mistake — entering total overtime wages instead of just the premium.
Qualified overtime premium checker
Premium vs. total overtime — the examples that matter
Time-and-a-half means 1.5× your regular rate. Split that into two parts: 1.0× is the base (taxed), and 0.5× is the premium (deductible). Double-time (2.0×) has a 1.0× premium, but only the portion required by the FLSA counts — most double-time is contractual, not FLSA-mandated, so check your situation.
| Regular rate | Overtime rate | Premium that qualifies | Doesn't qualify |
|---|---|---|---|
| $20 | $30 (1.5×) | $10 | $20 base |
| $25 | $37.50 (1.5×) | $12.50 | $25 base |
| $40 | $60 (1.5×) | $20 | $40 base |
| $20 | $40 (2.0×) | $10 (FLSA half only) | $20 base + extra $10 contractual |
What does NOT count as qualified overtime
- The base (straight-time) portion of your overtime hours — only the premium half qualifies.
- Bonuses, commissions, and shift differentials, even if paid for extra or night work.
- Contractual or union overtime paid for hours under 40 in a week (the FLSA threshold is 40).
- 'Overtime' that isn't required by the FLSA, such as premium pay negotiated purely by contract.
Where you'll see it on your W-2
For tax year 2026, employers report your qualified overtime premium in Box 12 of your W-2 using code TT. That figure is your starting number for the deduction on Schedule 1-A. For tax year 2025, separate reporting wasn't required, so you may need to calculate the premium yourself from pay stubs — which is exactly what the checker above helps you do.
Frequently asked questions
Is my entire overtime paycheck tax-free under the new deduction?
No. Only the FLSA premium — the extra half-time above your regular rate — qualifies. If overtime pays 1.5× your normal rate, only the 0.5× premium is deductible; the base 1.0× is taxed normally.
Does double-time qualify for the overtime deduction?
Only the portion required by the FLSA qualifies. The FLSA requires time-and-a-half (a 0.5× premium) for hours over 40 in a week. Double-time is usually contractual, so generally only the FLSA-required half counts — verify with your employer's payroll.
Do bonuses or shift differentials count as qualified overtime?
No. Bonuses, commissions, and shift differentials are not qualified overtime, even when tied to extra or late-night work. The deduction is limited to the FLSA overtime premium for hours worked beyond 40 in a workweek.
How do I find my qualified overtime amount for 2025?
For 2025, employers weren't required to report it separately, so calculate it yourself: multiply your overtime hours by the premium (overtime rate minus regular rate). The checker above does this for you. For 2026, it appears on your W-2 in Box 12, code TT.
IRS sources & verification
Last reviewed July 12, 2026.