No Tax on Overtime for Government Employees (Comp Time) (2026)
State and local workers who get comp time instead of cash can still qualify, in the year the comp time is paid. You can deduct the overtime premium (the “half” of time-and-a-half) up to $12,500, or $25,000 if married filing jointly. For 2026, use the code TT amount on your W-2.
- Cap $12,500 · joint $25,000
- W-2 box 12 code TT
Special rule: Comp time under 29 USC 207(o) counts when it’s paid out as wages, not when it’s earned (FS-2026-13, Q18).
Overtime calculator for government employees (comp time)
Private: runs in your browserEstimate of federal income tax only. Not tax advice.
Example: public employee
- County employee, $30/hour, 150 overtime hours paid in cash or used comp time, single, $70,000 incomePremium: 0.5 × $30 × 150 hours = $2,250.Deduct $2,250 · save about $495 in federal tax
Planning estimate from pay and hours. Your 2026 deduction uses the code TT amount on your W-2.
What public employees should know
- Comp time earned in 2025 but used in 2026 counts in 2026.
- Cashing out comp time when you leave also counts in the year it’s paid.
- Federal employees have separate rules. See the IRS FAQ.
- Only overtime the federal FLSA requires counts. Extra pay from state law or a contract alone doesn’t.
Government Employees (Comp Time): FAQ
Does comp time count for no tax on overtime?
Yes, for FLSA overtime-eligible state and local employees, when the comp time is paid as wages.
I earned comp time but haven’t used it. Can I deduct it?
Not yet. It counts in the year you take it as paid time off or cash it out.
Where do I find the amount?
Your employer reports it in box 12 code TT on your W-2.
How much overtime can public employees deduct?
Up to $12,500 of qualified overtime, or $25,000 on a joint return, for 2025 through 2028. It shrinks above $150,000 of income ($300,000 joint).
Does this lower Social Security or Medicare?
No. It only lowers federal income tax. State tax depends on your state.
Related tools and guides
- Police OfficersSpecial FLSA rules apply. See what counts.
- FirefightersSpecial FLSA rules apply. See what counts.
- NursesSpecial FLSA rules apply. See what counts.
- No tax on overtime calculatorW-2 code TT or an hours estimate, cap, phase-out and tax saved.
- W-2 box 12 code TTWhat code TT means, and what to do if it is missing or wrong.
- Double time and state overtimeDouble time, daily overtime, contracts: what counts.
- No tax on overtime by jobNurses, police, firefighters, drivers and more.