W-2 box 12 code TT: how to calculate qualified overtime for 2026

Updated November 12, 2026. A plain-language walkthrough with worked examples. Not tax advice.

Starting with 2026 Forms W-2, employers must report qualified overtime compensation in box 12 with code TT. For 2025 the IRS allowed approximations and other reporting methods; for 2026 the amount is mandatory and has to be computed. Employees use it to claim the federal "no tax on overtime" deduction, which runs for tax years 2025 through 2028.

The one-sentence rule. Code TT is the premium that section 7 of the Fair Labor Standards Act required you to pay: half the employee's regular rate for each hour worked over 40 in a workweek, counting only premium you actually paid.

Why code TT won't tie to your payroll register

The register shows the whole overtime payment. Code TT keeps only the FLSA-required half-time premium, figured workweek by workweek. These are the usual differences:

Situation	Overtime paid	Code TT
$20/h, 5 h at time-and-a-half	$150.00	$50.00
$20/h, 10 h at double time	$400.00	$100.00
Four 10-hour days (daily overtime, 40 weekly hours)	$240.00	$0.00
38 h worked + 8 h holiday, payroll paid 6 h OT	$180.00	$0.00
Salaried nonexempt, $600 for 40 h, worked 44 h	$90.00	$30.00
Same salary, fluctuating workweek method	$27.28	$27.28

Step 1: work in workweeks, not pay periods

FLSA overtime is owed per fixed 168-hour workweek. A semi-monthly or biweekly pay period can hide overtime (45 hours one week, 35 the next) or create overtime the FLSA never required. Rebuild hours worked by workweek from timekeeping records. Paid time off, holidays not worked and sick time are not hours worked.

Step 2: compute the regular rate

The regular rate is all includable pay for the workweek divided by hours worked. Includable pay covers straight-time wages for every hour (including the straight-time part of overtime hours), shift differentials, nondiscretionary bonuses and commissions, and the tip credit for tipped employees. Discretionary bonuses, expense reimbursements and pay for hours not worked are excluded.

Example: 45 hours at $20 plus a $50 production bonus. Includable pay is $900 + $50 = $950. Regular rate: $950 ÷ 45 = $21.11.

Step 3: take half the regular rate for hours over 40

Required premium = 0.5 × regular rate × hours over 40. In the example: 0.5 × $21.11 × 5 = $52.78.

If your payroll paid overtime at 1.5 × the $20 base rate, it paid $50.00 of premium, not $52.78. Only the $50.00 actually paid is reportable. The $2.78 shortfall is an FLSA back-pay issue, and it becomes code TT in the year you pay it.

Step 4: add bonus true-ups in the year paid

A quarterly or annual nondiscretionary bonus raises the regular rate of every workweek it covers. Allocate it across those weeks (equally per week, or per hour worked), compute the extra half-time premium for weeks with overtime, and report what you pay in the year you pay it. A December workweek paid in January belongs on the next year's W-2.

Special cases

Two rates in one week: use the weighted average of all straight-time pay over all hours, unless a rate-in-effect agreement applies.
Tipped employees: the regular rate includes the tip credit and can't be lower than the applicable minimum wage.
Salaried nonexempt, fixed salary for 40 h: regular rate = salary ÷ 40, and code TT is half of it for each hour over 40.
Fluctuating workweek: regular rate = salary ÷ hours actually worked; the half-time payment is the whole premium.
Public-sector comp time: code TT arises when comp time is paid out, not when it is earned.

The CSV columns Box12TT uses

Column	What to put there
employee_id	Required. Any stable ID.
employee_name	Optional, shown in results.
week_ending	Required. Last day of the FLSA workweek (YYYY-MM-DD or MM/DD/YYYY).
pay_date	Check date; decides the tax year. Defaults to week_ending.
pay_type	hourly (default), salary_fixed or salary_fww.
hours_worked	Required. Hours actually worked in the workweek, excluding PTO and holidays not worked.
straight_time_pay	Hourly: straight-time wages for non-overtime hours. Salaried: the weekly salary.
overtime_pay	All time-and-a-half overtime earnings for the week (the full line, not just the premium). For salary_fww, the half-time pay.
doubletime_pay	Double-time earnings, if any.
overtime_hours	Hours paid as overtime. Needed for tipped employees.
other_includable_pay	Shift differentials, nondiscretionary bonuses and commissions earned in that week.
excluded_pay	PTO, holiday, discretionary bonus, reimbursements. Kept out of the regular rate.
tip_credit	Total tip credit taken that week.
min_wage	Applicable minimum wage floor for the regular rate (tipped employees).
salary_hours	Hours a fixed salary is meant to cover (default 40).

Several rows for the same employee and workweek are added together, so a one-row-per-pay-item export works too. Bonus true-ups go in a separate file with the columns employee_id, bonus_amount, pay_date, period_start, period_end, allocation, ot_trueup_paid.

Run your file through the calculator Download the CSV template

Sources

IRS, General Instructions for Forms W-2 and W-3 (2026), box 12 code TT.
IRS fact sheet FS-2026-13 on reporting qualified overtime compensation (updated August 2026), and Notice 2025-62 (2025 transition relief).
29 CFR Part 778, overtime compensation and the regular rate.
"When Box 12, Code TT Will Not Tie to the Payroll Register," CPA Practice Advisor, October 13, 2026.