Schedule1ADesk / 2026 Tax & Payroll Guides / How Does No Tax on Overtime Work in 2026? (FLSA 0.5x Rule, Caps & Examples)
How Does No Tax on Overtime Work in 2026? (FLSA 0.5x Rule, Caps & Examples)
How does the 2026 No Tax on Overtime deduction actually work?
Instead of making your entire 1.5x overtime paycheck tax-free, federal law allows you to deduct the 0.5x FLSA overtime premium (the extra half-time pay above your regular hourly rate for hours worked over 40 in a workweek), up to $12,500 for Single filers or $25,000 for Married Filing Jointly on IRS Schedule 1-A.
Instead of making your entire 1.5x overtime paycheck tax-free, federal law allows you to deduct the 0.5x FLSA overtime premium (the extra half-time pay above your regular hourly rate for hours worked over 40 in a workweek), up to $12,500 for Single filers or $25,000 for Married Filing Jointly on IRS Schedule 1-A.
Open Interactive 2026 Schedule 1-A & W-2 Box 12 Calculator
2026 Form W-2 Box 12 & Schedule 1-A Reference Table
| W-2 Box / IRS Schedule | 2026 Reporting & Deduction Rule |
|---|---|
| Box 12 Code TT (New for 2026) | Qualified FLSA 0.5x Overtime Premium · Deduct up to $12,500 Single / $25,000 MFJ on Schedule 1-A Part III |
| Box 12 Code TP + Box 14b TTOC (New for 2026) | Qualified Voluntary Tips in 75 TTOC Occupations · Deduct up to $25,000 on Schedule 1-A Part II |
| Box 12 Code D / S / E / G | Pre-tax 401(k), SIMPLE IRA, 403(b), and 457(b) deferrals · Lowers MAGI to prevent Schedule 1-A phase-out |
| Box 12 Code W | Employer + Employee pre-tax HSA contributions · Excluded from Box 1 wages and lowers MAGI |
| Box 12 Code DD | Informational cost of employer-sponsored health coverage · Non-taxable |
| Form 1098-VLI (Schedule 1-A Part IV) | Up to $10,000 deduction for interest on new U.S.-assembled passenger vehicles (VIN starts with 1, 4, 5, or 7) |
| Schedule 1-A Part V (Age 65+ Bonus) | $6,000 per spouse age 65+ ($12,000 joint) · Phases out above $75,000 Single / $150,000 MFJ |
Frequently Asked Questions
How does the 2026 No Tax on Overtime deduction actually work?
Instead of making your entire 1.5x overtime paycheck tax-free, federal law allows you to deduct the 0.5x FLSA overtime premium (the extra half-time pay above your regular hourly rate for hours worked over 40 in a workweek), up to $12,500 for Single filers or $25,000 for Married Filing Jointly on IRS Schedule 1-A.
Do I have to itemize deductions to claim W-2 Box 12 Code TT or Code TP?
No. All four deductions on 2026 IRS Schedule 1-A (Qualified Tips, Qualified Overtime, Auto Loan Interest, and the $6,000 Senior Deduction) are above-the-line deductions available to both Standard Deduction and Itemized filers.