No Tax on Overtime: Double Time, State Overtime and Other Edge Cases

Tax year 2026 · Last updated Nov 10, 2026 · Maintained by the WattFlow team

Only the overtime that federal law requires counts: half your hourly pay for each hour over 40 in a week.Double time still counts as 0.5×. Overtime required only by state law or aunion contract doesn’t count.

Open the overtime calculator

Double time

Being paid 2× doesn’t double the deduction. The IRS counts only the half that federal law requires.

Time and a half$30/hour × 10 hours: $450, of which $150 is the premiumDeduct $150
Double time$30/hour × 10 hours: $600, of which $300 is above your rateStill deduct $150

State and daily overtime

Federal law looks at the week: hours over 40. Some states, like California, also pay overtime for long days. Those state-only hours don’t count.

One 10-hour day, 38 hours that week2 hours of state overtimeCounts: 0 hours
Five 9-hour days, 45 hours5 hours over 40Counts: 5 hours
Four 12-hour days, 48 hoursMore daily hours under state rulesCounts: 8 hours (over 40)

Contracts, holidays and salaried jobs

Premiums paid only because of a union contract or company policy
Holiday or weekend pay, unless the hours are also over 40 that week
Overtime for FLSA-exempt workers (many salaried managers and professionals)

What to use for 2026

You don’t have to sort this out yourself. Your employer reports the qualifying amount as W-2 code TT, and that’s the most you can deduct. If it looks too low, ask for a Form W-2c.

Frequently asked questions

Does no tax on overtime apply to double time?

Only partly. If you are paid 2× for FLSA overtime hours, only 0.5× your regular rate counts as qualified overtime. The extra 0.5× above time-and-a-half doesn’t.

Does California daily overtime count?

Only to the extent the hours are also over 40 in the workweek under the FLSA. Overtime for working more than 8 hours in a day, when your week stays at or under 40 hours, doesn’t qualify.

Does union contract overtime count?

Not unless the FLSA also requires it. Overtime paid only because of a collective bargaining agreement or company policy isn’t qualified overtime.

Do holiday pay or weekend premiums count?

Not by themselves. Only the premium the FLSA requires for hours over 40 in a workweek counts.

What about public employees with comp time?

Special FLSA rules apply to some public-sector workers. Check code TT on your W-2; for 2026 that amount is what you can use.

I worked overtime for two employers. Do I add it up?

Yes. Add the code TT amounts from each W-2. The $12,500 cap ($25,000 joint) applies to the total.