Overtime Premium Pay Deduction
Deduct overtime premium wages under the OBBB Act. Save up to $6,250 on your taxes.
Who Qualifies?
The OBBB Act overtime deduction is available to employees who:
- Are covered by the Fair Labor Standards Act (FLSA) - Most hourly and many salaried employees
- Worked more than 40 hours per week and received overtime premium pay
- Have OBBBTT income reported in Box 12 of their W-2
- Meet income requirements (see phase-out rules below)
👀 Look for "OBBBTT" in Box 12 of your W-2. This shows your total overtime premium pay eligible for the deduction.
How Much Can You Deduct?
The deduction amount depends on your filing status and income:
| Filing Status | Maximum Deduction | Phase-out Starts |
|---|---|---|
| Single | $12,500 | $150,000 MAGI |
| Married Filing Jointly | $25,000 | $300,000 MAGI |
| Married Filing Separately | $12,500 | $150,000 MAGI |
| Head of Household | $12,500 | $150,000 MAGI |
Phase-out Formula
Once your MAGI exceeds the phase-out threshold, your deduction is reduced by $200 for every $1,000 over the limit. The deduction phases out completely at $212,500 (single) or $425,000 (married filing jointly).
What Qualifies as "Overtime Premium"?
Only the premium portion of overtime pay qualifies for this deduction:
Example Calculation
• Regular hourly rate: $20.00
• Overtime rate: $30.00 (time and a half)
• Hours of overtime: 200 hours
Premium portion: ($30.00 - $20.00) × 200 = $2,000
This $2,000 would be your OBBB deduction (if under the cap)
✅ Qualifies
- FLSA overtime premium (50% extra)
- Double-time premium portion
- Holiday overtime premium
- Weekend overtime premium
❌ Does Not Qualify
- Regular hourly wages
- Shift differentials
- Bonuses or commissions
- Comp time payments
How to Claim the Deduction
Step 1: Check Your W-2
Look for code "OBBBTT" in Box 12 of your W-2. This amount represents your total overtime premium pay eligible for the deduction.
Step 2: Complete Schedule 1-A
The IRS released Schedule 1-A specifically for OBBB deductions. Enter your overtime premium amount on Line 1.
Step 3: Apply Income Limits
If your MAGI exceeds the phase-out threshold, calculate the reduced deduction using the worksheet provided with Schedule 1-A.
Step 4: Transfer to Form 1040
The total from Schedule 1-A transfers to Schedule 1, Line 8l, then to Form 1040, Line 8.
💡 Pro Tip: If you don't see "OBBBTT" on your W-2 but worked overtime, contact your payroll department. They may need to issue a corrected W-2.
Special Cases & FAQ
Railroad Workers
Railroad employees covered by the Railway Labor Act are eligible if they worked more than 40 hours per week and received premium pay. The Railroad Retirement Board will issue guidance on reporting.
Multiple Jobs
If you had multiple jobs with overtime, combine all OBBBTT amounts from all W-2s, subject to the overall cap for your filing status.
Exempt Employees
Most salaried exempt employees don't qualify since they don't receive overtime premium pay. However, some exempt employees may work overtime under collective bargaining agreements.
Ready to File?
Use our recommended tax software to claim your OBBB deductions:
We may earn a commission at no cost to you
Calculate Your Overtime Savings
Use our interactive calculator to see exactly how much you can save with the OBBB overtime deduction.
Start Calculator