Part III No Tax on Overtime

Overtime compensation must be included in your gross income and is subject to income tax and generally social security and Medicare tax.

If you have net earnings from self-employment, use Schedule SE to figure the tax due on net earnings from self-employment.

You may be able to claim a deduction for qualified overtime compensation paid to you in 2025 and that is reported on Form W-2, Form 1099-NEC, or Form 1099-MISC. You can claim this deduction whether you claim the standard deduction or itemize deductions on Schedule A or Schedule A (Form 1040-NR).

If you are married, you must file a joint return with your spouse to claim this deduction.

For tax year 2025, qualified overtime was not required to be separately accounted for on Form W-2, Form 1099-NEC, or Form 1099-MISC. See the instructions for lines 14a and 14b for more information about how to identify the qualified overtime included in the amounts reported on these forms.

Fill out Schedule 1-A, Part III, only if:

You (and/or your spouse if filing a joint return) received qualified overtime compensation in 2025; and

You have a valid social security number (SSN). If you are married filing jointly, the spouse who received the qualified overtime compensation must have a valid SSN.

Maximum amount of deduction.

You can’t deduct more than $12,500 ($25,000 if married filing jointly) of qualified overtime compensation.

If you are married and filing a joint return, and both you and your spouse have qualified overtime compensation, the $25,000 maximum amount of deduction limit applies to your combined overtime compensation. It is not a per spouse limit.

The deduction amount (after applying the $12,500 ($25,000 if married filing jointly) limit) is reduced if your MAGI is greater than the amount shown next for your filing status.

Married filing jointly—$300,000.

Single, Head of household, or Qualifying surviving spouse—$150,000.

Your MAGI is the amount on line 3 on Part I of Schedule 1-A.

Qualified overtime compensation.

Qualified overtime compensation means overtime compensation that is paid to you as required under section 7 of the Fair Labor Standards Act of 1938 (FLSA) that is more than the amount of your regular rate of pay. This generally means the “half” portion of “time-and-a-half” compensation that is required by the FLSA. This “half” portion may be described by employers on various forms and statements as “overtime premium” or “FLSA Overtime Premium”.

In order for overtime to be required to be paid to you under the FLSA, you must (among other requirements) be covered by and not exempt from the FLSA (an FLSA- eligible employee). If you are ineligible for federal overtime, you are an FLSA-ineligible employee and you generally won't be paid overtime.

If you are an FLSA- eligible employee, you must generally receive overtime pay for hours you work that are more than a 40-hour workweek. Generally, the rate can’t be less than one and a half times your regular rate of pay.

Amounts that are not qualified overtime compensation.

The following amounts are not qualified overtime compensation and can’t be included when figuring your deduction for qualified overtime compensation.

Premium pay. Some employers under a collective bargaining agreement and/or under state law provide more pay than section 7 of the FLSA requires. For example, an employer might choose to pay more than “time-and-a-half.” The amount of overtime paid that is over “time-and-a-half” is not qualified overtime compensation.

Payment for holidays and weekends. Some employers may pay more for certain weekends or holidays even if the employee doesn’t work more than 40 hours in the workweek. Extra pay for certain weekends or holidays is generally not qualified overtime compensation if the employee doesn’t work more than 40 hours in the workweek.

Qualified tips. Qualified overtime compensation doesn’t include any amount you receive as a qualified tip.

Coverage under state rules. Some FLSA-ineligible employees are eligible for overtime under state law or are paid premium rates for certain work for other reasons. Overtime pay that is paid to these FLSA-ineligible employees is not qualified overtime compensation and these amounts can't be included when figuring the deduction for qualified overtime compensation.

Qualified overtime must be paid to a covered, nonexempt employee under the FLSA (an FLSA-eligible employee). Ask your employer or other service recipients whether you are an FLSA-eligible employee. For more information on coverage and exemption under the FLSA, see WHD Fact Sheets , Overtime Pay , and FLSA Guide .

Determining the amount of qualified overtime compensation for 2025.

Because no changes have been made to Form W-2, Form 1099-NEC, or Form 1099-MISC to account for a separate accounting of qualified overtime compensation, a separate accounting may not appear on your Form W-2, Form 1099-NEC, or Form 1099-MISC. Some employers may choose to provide for the amount of qualified overtime compensation using Form W-2, box 14. If your employer does provide a separate accounting of your qualified overtime on Form W-2, box 14, you can generally rely on this amount, and the methods described in paragraphs 1 through 5 don’t apply to you.

If you request the amount of your FLSA Overtime Premium from your employer or the service recipient, you can rely on the information that is provided to you to determine the amount of your qualified overtime compensation.

If the amount of your qualified overtime compensation isn’t separately identified on your Form W-2, Form 1099-NEC, or Form 1099-MISC, you can figure your qualified overtime compensation using one of the methods described in paragraphs 1 through 5.

If your employer is covered by a different overtime rule in section 7 of the FLSA, rather than the general rule in section 7(a), you must compute your overtime compensation using the rule that applies to you and may use any of the following methods so long as it produces a reasonable result under the rule that applies to you. This may apply if, for example, you are a public sector employee in fire protection or law enforcement, or an employee of a political subdivision of a state or an interstate governmental agency who receives compensatory time off instead of cash overtime. See Example 4 and Example 5 for how this might apply to certain employees.

Statement received separately accounts for overtime. If a statement from your employer separately shows the “half” portion of the “time and a half” compensation (FLSA Overtime Premium), you can use the FLSA Overtime Premium that is separately shown to determine the amount of your qualified overtime compensation.

Statement shows the overtime premium and regular wages. If you are paid FLSA Overtime Premium and you receive a statement from your employer or the service recipient and the statement shows the total of all wages for the overtime hours (FLSA Overtime Premium plus regular wages), you can divide the total amount by three (3) and use the result when figuring your qualified overtime compensation.

Statement shows the overtime premium and the premium you are paid is more than the amount of the FLSA Overtime Premium. If you are paid more than the amount of FLSA Overtime Premium (for example, your employer pays you double your regular wages) and you receive a statement from your employer or the service recipient that shows the portion of the overtime earnings that is more than your regular wage rate for the overtime hours, then you can multiply that portion by the appropriate fraction to calculate the half portion of FLSA Overtime Premium. See Example 2 for more information on how to figure the amount of your qualified overtime compensation in this situation.

Statement shows the overtime premium and regular wages and the premium you are paid is more than the amount of the FLSA Overtime Premium. If you are paid more than the amount of FLSA Overtime Premium (for example, your employer pays you double your regular rate of pay) and you receive a statement from your employer or the service recipient that shows the total of all pay for the overtime hours (for example, double your regular wages), then you can multiply the total amount by the appropriate fraction to estimate the half portion of FLSA Overtime Premium. See Example 3 for more information on how to figure the amount of your qualified overtime compensation in this situation.

Statement doesn’t show overtime and employer or service recipient won’t provide information. If the statements you receive from your employer or the service recipient don’t show the extra pay or the FLSA Overtime Premium and your employer or service recipient doesn’t give you any additional information, you can use a reasonable method to figure the amount of your qualified overtime compensation, that takes into account:

The regular rate paid to you by your employer or service recipient, and

The number of hours over the 40-hour workweek or an estimate if you don’t have records of the actual hours you worked.

If you use the method described in paragraph 2 or paragraph 4 to determine the amount of your qualified overtime compensation, and the method results in underestimating your qualified overtime compensation (for example, because your regular rate of pay is increased by a discretionary bonus), you can adjust the method to take the difference into account.

Make sure to keep a record of the documents you use when determining the amount of your qualified overtime compensation.

Example 1.

You are an FLSA- eligible employee. In 2025, you received $50,000 in regular pay and $15,000 for overtime hours worked. Your Form W-2 does not separately show your qualified overtime compensation; however, you have access to your payroll system that shows you were paid $15,000 for overtime hours in 2025. You can include $5,000 of your wages for the overtime hours when figuring your deduction for qualified overtime compensation. The $5,000 is the “half” portion of “time-and-a-half” ($15,000 divided by 3).

Example 2.

You are an FLSA- eligible employee and work for an employer who pays overtime equal to twice the regular pay. In 2025, you were paid $50,000 for non-overtime hours and $20,000 for overtime hours worked. Your Form W-2 does not separately show qualified overtime compensation. However, you have a pay stub showing that $10,000 of the overtime pay was for the normal rate of pay for the overtime hours and $10,000 of the overtime pay was the premium amount. “Time-and-a-half” would be equal to $15,000 (the $10,000 for your regular wage for the overtime hours multiplied by 1.5). The “half” portion of the “time-and-a-half” rate required by the FLSA is $5,000 ($15,000 divided by 3). You can include $5,000 when figuring your deduction for qualified overtime compensation.

Example 3.

The facts are the same as in Example 2 , but your pay stub does not separately show the premium amount of overtime pay that is more than your regular wages. Instead, it shows that $20,000 was the total amount of pay for the overtime hours. The $20,000 is double your regular wages for the overtime hours you worked. Your regular wages are $10,000 (the $20,000 total amount of overtime pay divided by 2). “Time-and-a-half” would be equal to $15,000 (the $10,000 of your regular wages for the overtime hours multiplied by 1.5). The “half” portion of the “time-and-a-half” rate required by the FLSA is $5,000 ($15,000 divided by 3). You can include $5,000 when figuring your deduction for qualified overtime compensation.

Example 4.

You work in law enforcement and your employer is covered by a special overtime rule in section 7 of the FLSA. In 2025, you were paid $15,000 for overtime hours worked on a “work period” basis of 14 days. You can include $5,000 of your overtime pay when figuring your deduction for qualified overtime compensation ($15,000 divided by 3).

Example 5.

You work for a state government agency that is covered by a special overtime rule in section 7 of the FLSA. Your state agency pays compensatory time at a rate of one and one-half hours for each overtime hour worked. In 2025, you were paid wages of $4,500 for the compensatory time you took off during the year. You can include $1,500 when figuring your deduction for qualified overtime compensation ($4,500 divided by 3).

Valid SSN.

You and/or your spouse who received qualified overtime compensation must have a valid SSN to take this deduction. A valid SSN for purposes of the deduction for qualified overtime compensation is one that is valid for employment and that is issued by the SSA before the due date of your 2025 return (including extensions). For more information, see Valid SSN for No Tax on Tips , earlier.

Line 14a.

In most cases, the amount on Form W-2, box 1, includes all of your wages and compensation, including your regular wages plus any qualified overtime compensation. Enter on line 14a only the qualified overtime compensation amount that is included on Form W-2. Some employers may choose to provide the amount of qualified overtime compensation to employees using box 14 of Form W-2. See Determining the amount of qualified overtime compensation for 2025 , earlier, to figure the amount to enter on Schedule 1-A, line 14a. Keep a copy of any document you relied on to support your calculation of qualified overtime compensation.

If you and/or your spouse received qualified overtime compensation from more than one employer in 2025, complete the Qualified Overtime Compensation From More Than One Employer Worksheet. If you received qualified overtime compensation that is not included in box 1 of Form W-2 (for example, overtime amounts that are deferred under a qualified retirement plan), enter that amount here. Keep a copy of any document you relied on to support your calculation of qualified overtime compensation.