I work in an union job that pays overtime by the day. If I work 10 hours, I get 2 hours overtime, regardless if I work another day that week. My schedule is 5 days a week, but I usually try to work 4 10s, getting 8 hours of OT in the process. From what I have read, it seems this OT would not be "qualified." I am doubtful my employer will make an effort to distinguish qualified OT from unqualified. How will all this work when filing taxes?
How will "qualified overtime" be determined?
byu/TunaChaser intax
Posted by TunaChaser
10 Comments
You can only claim qualified overtime. If your employer doesn’t provide you documentation on that you would have to figure out what weeks if any you worked over 40 hours per week, and only deduct the 50% premium on the hours over 40 a week that you actually worked.
I imagine the payroll software will calculate it correctly providing it is set up correctly and then it will be reflected on your w2.
The definition of “qualified overtime” is found in the Fair Labor Standards Act, and eventually will be reported on your W-2. However, you are correct that working four 10 hours shifts does not qualify, the FLSA requires that it be overtime paid for working more than 40 hours in a week.
Daily OT (pay exceeding 8 hours) does not qualify as the tax-exempt OT. It only counts for work that exceeds 40 hours a weeks and must meet other standards of OT in the FLSA.
Have you tried asking them instead of assuming?
For 2025, employers are not required to report this to you or for you, though they *may* do so voluntarily (in box 14 of the W-2 or on a separate statement). If they don’t, it’s up to you to figure and obtain records of your qualified overtime.
The only overtime that counts for the deduction is when you work more than 40 hours in a week, and the deduction is only half of your base hourly rate for each of those hours regardless of how much you actually got paid. That is your “overtime premium”.
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Only overtime required by FLSA is eligible for the deduction. That is 50% more on hours over 40 in a week.
If your employer pays double time for overtime, only the 50% portion is deductible.
If your union or employer pays an overtime rate for hours over 8 in a day, no deduction applies. Only hours in excess of 40 for the week are counted.
Even if your state requires overtime pay that is more beneficial than FLSA requirements, only that part part required by FLSA is deductible on the federal return.
IRS Notice 2025-69 (Nov 21, 2025):
>Some employers or other service-recipients, on their own initiative, under a collective bargaining agreement with a labor union, and/or under State law, may provide overtime pay that is not required by 29 USC § 207. ***For example, an employer may choose to pay a higher overtime amount than the one and one-half times an individual’s regular rate of pay that is generally required by the FLSA (e.g., the employer may choose to pay double time for hours worked over 40 in a workweek) or they may choose to pay employees an extra amount to work on weekends or holidays. In such cases, while the additional one-half times portion required by the FLSA may be qualified overtime, payments in excess of the FLSA-required premium are not.***
>Section 225(c)(2) of the Code excludes from the definition of qualified overtime compensation any qualified tips as defined in section 224(d) of the Code.
Say you make twenty dollars and hour. Overtime is 1.5 so 30, you won’t pay tax on the ten dollar difference.
Say you make 20 dollars an hour. At time and a half you make 30. You won’t be taxed( will get back) the tax paid on the ten dollar difference