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W-2 Box 14 Code TT – If you’ve received your W-2 form for the 2025 tax year and noticed “Code TT” or a similar label like “OBBBTT” or “FLSA OT Prem” in Box 14, you’re likely dealing with a new tax provision under the One Big Beautiful Bill Act (OBBBA). This code relates to qualified overtime compensation, a deductible amount that can reduce your taxable income—often referred to as the “no tax on overtime” rule. In this guide, we’ll break down what W-2 Box 14 Code TT means, why it appears on your form, and step-by-step instructions on how to report it on your taxes. Whether you’re an employee wondering about your deduction or preparing your return, understanding this can help maximize your tax savings for 2025.
What Does Code TT Mean in Box 14 on Your W-2?
Box 14 on Form W-2 is labeled “Other” and is used by employers to report miscellaneous information that doesn’t fit elsewhere on the form. For the 2025 tax year, Code TT specifically denotes the amount of qualified overtime compensation—the premium portion of your overtime pay that’s eligible for a federal income tax deduction. This stems from the OBBBA, enacted as Public Law 119-21, which allows individuals to deduct certain overtime earnings from their taxable income for tax years 2025 through 2028.
Qualified overtime compensation refers to the extra pay you receive for overtime hours that exceeds your regular hourly rate, as required under Section 7 of the Fair Labor Standards Act (FLSA). Typically, this is the “half” in “time-and-a-half” pay—for example, if your regular rate is $20 per hour, the qualified portion for overtime is $10 per overtime hour (0.5 times your regular rate). It only applies to FLSA-covered, non-exempt employees who are eligible for mandatory overtime pay. Pay above the FLSA minimum (like double time) may qualify only for the FLSA-required premium portion.
Important note: For 2025, reporting this in Box 14 is optional but encouraged by the IRS to help employees claim the deduction. Employers aren’t penalized for not separating it out, as 2025 is a transition year. Starting with the 2026 tax year (W-2s issued in 2027), it will move to Box 12 with Code TT on updated forms.
Why is Qualified Overtime Reported This Way?
The OBBBA introduced this deduction to provide tax relief for overtime workers, but the IRS forms weren’t updated in time for 2025. As a result, employers may report the qualified amount in Box 14 using labels like:
- TT (Qualified Overtime)
- OBBBTT (One Big Beautiful Bill Qualified Overtime)
- FLSA OT Prem (FLSA Overtime Premium)
If your employer provides it via a separate statement, online portal, or not at all, you can still calculate and claim it yourself. This amount doesn’t affect your W-2’s taxable wages in Boxes 1, 3, or 5—it’s purely informational for your deduction.
How to Calculate Qualified Overtime Compensation If Not Reported in Box 14?
If Code TT isn’t listed or the amount seems off, don’t worry—you can determine it using IRS-approved methods from Notice 2025-69. Keep records like pay stubs for support. Here’s a simplified step-by-step:
- Identify Eligible Overtime Hours: Count hours worked over 40 in a workweek (or under special FLSA rules like for firefighters or hospital workers).
- Determine Your Regular Rate: This is your base hourly rate, including bonuses or commissions that affect it.
- Calculate the Premium: Multiply overtime hours by 0.5 times your regular rate. For example:
- Overtime hours: 100
- Regular rate: $25/hour
- Qualified amount: 100 × ($25 × 0.5) = $1,250
- Adjust for Higher Rates: If paid double time (2x regular rate), the qualified premium is half the excess (e.g., multiply the excess pay by 0.5).
- Use Aggregate Method If Needed: If overtime is lumped in, take one-third of the total overtime pay as the premium (for 1.5x rates).
For complex situations (e.g., varying rates), consult the full Notice or a tax professional.
How to Report Code TT on Your Tax Return?
The qualified overtime deduction is an above-the-line adjustment, meaning it reduces your adjusted gross income (AGI) without itemizing. Here’s how to report it on your 2025 Form 1040:
- Gather Your Amount: Use the Box 14 figure or your calculation.
- Complete Schedule 1 (Form 1040): Enter the amount on the line for “Qualified overtime compensation deduction” (likely on the new Schedule 1-A per IRS guidance).
- Apply Limits: Cap at $12,500 ($25,000 for married filing jointly).
- Check Phaseouts: The deduction reduces by $100 for every $1,000 your modified AGI exceeds $150,000 ($300,000 joint). Calculate modified AGI as AGI plus certain exclusions like foreign earned income.
- File Jointly If Married: Both spouses need valid SSNs, and you must file jointly to claim up to $25,000.
- Attach Supporting Docs: No attachment required, but retain records for audits.
Tax software like TurboTax will guide you through this if you enter your W-2 details. If you’re a federal employee, check for agency-specific guidance.
Limits, Phaseouts, and Eligibility for the Deduction
- Annual Caps: $12,500 for single/head of household; $25,000 for joint filers.
- Income Phaseouts: Starts at $150,000 MAGI for singles ($300,000 joint) and fully phases out at higher levels.
- Eligibility: Must be FLSA non-exempt; excludes self-employed unless reported on 1099 with separate accounting.
- Sunset: The provision ends after 2028 unless extended.
Frequently Asked Questions About W-2 Box 14 Code TT
What if Code TT isn’t on my W-2?
You can still claim the deduction by calculating it yourself using pay stubs and IRS methods.
Does Code TT affect my state taxes?
It only applies to federal income tax; check your state’s rules for any similar deductions.
Is all overtime qualified?
No—only the FLSA-required premium for eligible employees. Contractual or voluntary overtime may not qualify.
What if my Box 14 amount exceeds the cap?
Report the full calculated amount, but apply the $12,500/$25,000 limit on your return.
Can I amend my return if I miss this deduction?
Yes, file Form 1040-X within three years if you qualify.
Navigating W-2 Box 14 Code TT can seem complex, but it’s a valuable tax break for overtime workers. Always consult the latest IRS guidance or a tax advisor for personalized advice, especially with the new law’s nuances. By accurately reporting this, you could significantly lower your 2025 tax bill. For more details, visit IRS.gov and search for “qualified overtime compensation.”