A W-2 that shows $30,000.00 in box 12, code TT, does not make $30,000.00 deductible. For a single filer at $80,000 of MAGI the deduction stops at $12,500.00. The IRS example is the same shape: report the full premium, then apply the cap on Schedule 1-A.
Deduction
$12,500.00
The deduction is $12,500.00. Code TT on the W-2 can be higher.
How the total splits
Code TT is the FLSA premium above the regular rate, not the whole overtime check. After 2025, the deduction cannot exceed code TT on Form W-2 or a corrected W-2c. A pay stub or Form 4852 does not add to it. The reported amount is above the cap or the phase-out, so the deduction is smaller. Social Security and Medicare still apply. Tax saved uses 2026 brackets.
| Box 12 code TT | $30,000.00 |
|---|---|
| Deduction | $12,500.00 |
| Federal income tax saved | $2,750.00 |
| Reported above the deduction | $17,500.00 |
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Deduction = code TT, then the $12,500 cap ($25,000 joint) and the MAGI phase-out.
Starting with tax year 2026, the employer reports qualified overtime compensation in Form W-2 box 12 with code TT. That amount is the FLSA premium above the regular rate. On time-and-a-half, it is the extra half, not the whole overtime check. The 2026 W-2 instructions use that half as the example. The amount can be larger than the deduction. FS-2026-13 says an employer who paid $30,000 still reports $30,000, even though the deduction cap is $12,500, or $25,000 on a joint return.
For years after 2025, you cannot count qualified overtime above the code TT amount on Form W-2, or on a corrected Form W-2c, when you figure the deduction. Notice 2025-69 was the 2025 transition, when the W-2 might not show the premium at all. If the code is missing or too low, ask the employer for a W-2c. FS-2026-13 says an amount left off the form is not counted, even if a pay stub shows it, and Form 4852 does not stand in for the W-2. If the code is too high, use only the premium you were actually paid.
The deduction is claimed on Schedule 1-A, Part III, after the cap and the phase-out. It does not reduce Social Security or Medicare. An employer does not cut withholding for this deduction unless you give them a new Form W-4. The 2026 Form W-4 puts that estimate on step 4(b). This page does not fill out the W-4.
| Code TT | $30,000.00 |
|---|---|
| Deduction | $12,500.00 |
| Tax saved | $2,750.00 |
| Deduction | $10,000.00 |
|---|---|
| Tax saved | $2,200.00 |
It is the year's qualified overtime compensation: the premium the Fair Labor Standards Act requires above your regular rate. On a time-and-a-half hour, that is the extra half. Employers report it in box 12 with code TT beginning in tax year 2026.
The W-2 reports the premium you were paid. The deduction then applies the $12,500 cap, or $25,000 if you file jointly, and the phase-out. A $30,000 code TT is still reported in full. The deductible amount is smaller.
For tax years after 2025, ask the employer for Form W-2c. You cannot deduct more than the code TT amount on the W-2 or the W-2c. A pay stub does not raise that amount, and Form 4852 does not replace the W-2 for this deduction. Tax year 2025 was different: Notice 2025-69 let you use a reasonable method when the form did not show the premium.
No. Overtime wages stay subject to income-tax withholding. FS-2026-13 says the employer may not reduce withholding for this deduction unless you give them an updated Form W-4. The 2026 Form W-4 accounts for it in step 4(b). Social Security and Medicare are unchanged.