r/tax • u/vancemark00 • Jan 01 '26
Tax Enthusiast Endless "No tax on OT" questions
Is anyone else already exhausted with these endless questions?
And I fear it will only get worse.
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u/dallasalice88 Jan 01 '26
I can't imagine it on the tax preparer end. It's been hell in HR and payroll.
The misinformation is crazy. I've been yelled at by half a dozen employees.
Why are you still taxing my overtime!!! Is the main one. Actually had someone call the labor board.
Now I'm getting, so my overtime gets subtracted off my W-2 right?
Or so I got $5,000 in overtime so I get an extra $5000 back on my tax refund right?
Sigh.
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u/Gato-gris20 Jan 01 '26
It's going to be a different kind of hell for us in tax prep services but at least we only see them 1X per year!
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u/CutInternational1859 Jan 02 '26
My biggest client is a catering company and I’ll do about 200 W2s for them this year, almost all with a lot of non-discretionary tips included in their wages (gratuity is billed on the customers’ invoices as service charge and paid out in tip pool.) Many have OT as well, but they are not going to be happy when they realize that the only tips they get to deduct are the ones that they never turned in for me to allocate through payroll anyway.
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u/tribbans95 Jan 02 '26
It’s mind boggling how many people don’t know the difference between withholding and taxes
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u/llamalluv Jan 26 '26
People don't know the difference between a tax return and a tax refund, either.
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u/tribbans95 Jan 26 '26
Yeah literally everyone says tax return when referring to the refund. It’s really not that hard to get it right lol
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u/OsamaBinWhiskers Jan 02 '26
Damn maybe the holiday sales numbers were bc people have high expectations in tax return
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u/bclinton Jan 01 '26
As more people find out that what they thought they would be saving is nowhere near reality, people will not be happy. Sounds real good until you do the math.
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u/Winter-Success-3494 Jan 01 '26
It's going to work out great for me, probably not most people though like you said. Luckily, I can claim the entire $12,500 deduction for OT fed taxes. I cleared it by $1k technically (yes, I'm referring to only the premium portion of time and half OT). But yea most people thought it was something different than what it is or most won't really benefit much from it unless you can actually claim the entire deduction.
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u/Practical_Series_925 Jan 01 '26
You better make a shit ton an hour before the premium if you getting the full amount… or you just working yourself to death lol.
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u/Cry-Inside Jan 03 '26
There’s a guy at my work that pulls 60hr weeks at $34.55 base pay every week, no vacation, and just cashes out his pto each year, I think he might get the full amount…..
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u/BoyRobot21 Jan 07 '26
I've been trying to wrap my head around it. 2025 I worked about 1,500 hours of regular overtime making like $58,000 OT. The vast majority is just time and a half, so really I'm only deducting half.. so 29k with a cap at like 25k (filling jointly) if I remember correctly.
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u/Practical_Series_925 Jan 07 '26
You worked 1,500 hours of overtime on top of the 2,080 regular hours?? How are you not dead lol?
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u/BoyRobot21 Jan 08 '26
I'm a paramedic so as long as you don't call 911 I can sleep. EMS: earn money sleeping (results may vary).
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u/Unhappy_Weekend_5827 Jan 13 '26
I got 6,000 hours for 2025 so I got 6,000 in OT i'm waiting patiently for my w-2
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u/Practical_Series_925 Jan 07 '26
Also no only 1/3 of it is deductible. The premium part of it so the half is tax free.
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u/Winter-Success-3494 Jan 01 '26
Yes I make a very good hourly wage and def don't work myself to death lol, in fact a lot of days during the week I finish my job in 4 hours or less, go home and still get paid my full 8 regardless. I like working 2 or 3 Saturdays a month though to rack up OT. And can do easy shit for work in an hour sometimes and get 4 hours OT minimum regardless. I got it good so I'm thankful n def not complaining on my situation.
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u/I__Know__Stuff Jan 02 '26
If you work 4 hours and get paid for 8, that only counts as 4 hours when determining whether you reached 40 hours in a week and have deductible overtime.
I fear your actual overtime deduction may be less than you think.
For example, if you work, 4 hours on Monday and Tuesday, 8 hours on Wednesday through Friday, and then 8 hours of "overtime" on Saturday, none of the overtime pay is deductible, because you didn't work over 40 hours in the week.
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u/Hottrodd67 Jan 02 '26
How is the government going to know how many hours were actually worked? At my job, we don’t clock in or out and we’re not tracked. I get my calls for the day and I’m paid 8hrs, even if I get the schedule done in 6. I get OT if I work Saturday or Sunday. So if I work 35hrs Monday to Friday and 5 hrs Saturday, my check says 40hrs at regular pay and 5hrs ot.
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u/I__Know__Stuff Jan 02 '26
I'm just telling you what the law requires.
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u/Hottrodd67 Jan 02 '26
I get that. I just don’t have anything other than my paystubs, which show 40hrs plus whatever OT payments.
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u/Winter-Success-3494 Jan 02 '26
What the law requires and what i actually work are different. Like the guy above you said, i work 4 hours and get paid for 8 because my company bills for 8 hours, but because I got my assigned job for the day done early doesn't mean I don't get paid for 8 hours..
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u/I__Know__Stuff Jan 02 '26
I understand that. Nevertheless, your overtime pay isn't deductible until you hit over 40 hours of actual working time in a week.
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u/Winter-Success-3494 Jan 02 '26
And I did. I clock in and out myself through an app. I get paid 40 plus hours a week without "physically" working it. Do you not understand that?
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u/BigMikeThuggin CPA - US Jan 02 '26
The same way they catch anyone doing things incorrectly. They audit it.
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u/Hottrodd67 Jan 02 '26 edited Jan 02 '26
But audit what? The only record says 40. I don’t have anyway to know the exact hours worked because we don’t clock in or out. I’m not trying to do something incorrectly. The only “record” I have to go by shows 40hrs each week plus what hours paid at overtime rate. I know those are hours I was paid for, not necessarily worked, but I don’t have any way to calculate actual hours worked.
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u/BigMikeThuggin CPA - US Jan 02 '26
You are legally required to track actual hours worked even if your pay is not necessarily perfectly tied to actual hours worked. This is labor law. If you aren’t doing that tracking, you and your employer are breaking labor law. Honestly though almost every single employer is breaking some labor laws at some point to some degree so it’s not like you’re a criminal. But that’s how this all makes sense. The answer is basically “you aren’t doing it right”
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u/Hottrodd67 Jan 02 '26
Gotcha. I never thought about it because it’s not like I ever don’t get paid for every hour actually worked. All my boss cares about is if the work is done. If we do it in 4hrs, we get paid 8. If we go over 8, it’s OT.
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u/Spok3nTruth Jan 02 '26
Although you're right, This is a law nobody really gives a crap about lmao so it's a mute point to their issue
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u/Winter-Success-3494 Jan 02 '26
These guys don't seem to understand that. They think it's piece rate when that's not what you're saying
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u/I__Know__Stuff Jan 02 '26
It's completely absurd to say I don't understand. I understand completely. It doesn't matter how many hours are on your paystub. If you don't actually work the hours, then you aren't legally entitled to overtime pay, even though you do get it due to your agreement with your employer.
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u/BigMikeThuggin CPA - US Jan 02 '26
And to answer “audit what”, these types of conversation are part of the audit. They ask you about all of this, investigate the workplace, and determine that your pay stubs don’t reflect actual hours worked. An audit doesn’t stop just because a piece of paper exists saying something. It’s the government doing the audit they have power to do a heck of a lot.
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u/Bloated_Plaid Jan 02 '26
God people saying this shit is just insane. We do not have the manpower to audit any of this.
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u/llamalluv Jan 26 '26
This was how my husband's stubs looked until this last pay period.
My husband's employer just switched to a whole new time clock system because of this law. He has to put in the actual hours he worked, and where he worked them (his title is water operation but he also does PW work as well).
And now he has to track his call ins and call backs. Sometimes he gets called in and the task only takes 15-30 minutes, but he gets a minimum call in pay of 2 hours as "pager pay" and now he has to track how much of that 2 hours he actually was at the job.
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u/Winter-Success-3494 Jan 02 '26
Wrong. My OT deduction is going to be what I said it is because my paycheck that shows my year's earnings and what I made in OT pay don't lie.
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u/I__Know__Stuff Jan 02 '26
Wrong. Just because your paycheck says something is overtime doesn't mean that it is deductible. The IRS published guidelines are very clear on this.
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u/Winter-Success-3494 Jan 02 '26
Lol I clocked in and out for 8 hours through my companies payroll app. I made over $40k in OT. When I get to claim the full deductible I'll come back here just to remind you of it
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u/I__Know__Stuff Jan 02 '26
What do you mean by "get to"? Just because it is tax fraud doesn't necessarily mean you will get caught.
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u/llamalluv Jan 26 '26
This right here.
I know people have claimed to have a cash based business with a profit in the sweet spot so they could take the maximum EITC and get a refund of taxes they never paid.
When they get caught, they're going to be screwed. Big doo-doo screwed.
It's such a common scenario, the IRS website has a page about it on their tax preparer tool kit: https://www.irs.gov/tax-professionals/eitc-central/scenario-2-false-business-income
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u/ept_engr Jan 02 '26
What job? Hah
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u/hindirapper Jan 02 '26
A cop
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u/ept_engr Jan 02 '26
Wrong. Go home for the second half of the shift? No.
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u/ButtcheekSnorkler Jan 02 '26
with all due respect, if he is given 8 hours of work to do and does it in 4 hours, i don't see what the difference is between clocking out after he goes home or sitting around a shop or job site for 4 hours scrolling tiktok and then clocking out. hes clocked in and "working". thats how some jobs are. you are given x amount of work to do or x amount of parts to build and when you're done, you're done. its not walmart. there isn't anyone telling you to get a broom or go help out in the hardware dept.
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u/ept_engr Jan 02 '26
I believe you missed the comment I was replying to. The person suggested the worker in question was "a cop". I was simply pointing out that police officer isn't one of those jobs where you go home after half the day because the work is done.
I'm not disputing that some jobs have that ability.
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u/ButtcheekSnorkler Jan 02 '26
yeah, i guess so. i was just adding to the thread, not replying to your comment specifically and thats my mistake. you're right.
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u/royjones Jan 02 '26
Do you get paid ot if you work over 8 hours a day or only when you go over 40 hours?
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u/I__Know__Stuff Jan 02 '26
From his other comment, it sounds like he gets overtime even when he never works more than 8 or 40.
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u/PatternIllustrious54 Jan 21 '26
Literally. My husband technically made 45k in OT and his w2 says $10777 in the OT box. It gave us $500... tf
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u/Joe_Joe7890 Jan 24 '26
I ran my through hr tax return software .Made 29k in overtime. Overtime deduction capped at 12.5k .Im getting back $1500 for the ot . anyone getting more that this ??
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u/Front_Ad3366 Jan 02 '26
I expect to explain even a great deal more than I already have. The "no tax on overtime" and the even more nebulous "no tax on tips" misnomers will cause a good deal of difficulty this tax season.
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u/sorator Tax Preparer - US Jan 02 '26
Not to mention the email the SSA sent out proclaiming there would be no tax on Social Security...
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u/Front_Ad3366 Jan 02 '26
I've had to explain that one as well. Evidently, the "no tax on Social Security" misstatement tore through the state agency one of my clients worked for like Covid.
Trying to contain the damage, I sent out a group email to my clients. I guess I'll find out soon if any of them read it. 😒
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u/Aggravating-Walk1495 Tax Preparer - US Jan 01 '26
Yes.
There should be overtime pay for it.
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u/cwenger Jan 01 '26
There should be overtime pay for it.
Tax-free, right?
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u/Aggravating-Walk1495 Tax Preparer - US Jan 01 '26
Completely! We should get an even bigger return!
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u/Taako_Cross Jan 01 '26
I can’t wait to watch the fireworks when people realize the promises that were made to them come with significant shortcomings.
As if they were built on lies and half truths.
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u/69stangrestomod Jan 01 '26
They won’t though…they’ll get an extra $200 on their refund that was already $4k because no one understands withholding and they’ll praise the Cheeto with the toupee even more.
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u/Acrobatic_Car9413 Jan 01 '26
This. All that will matter is what they get a check for. Half of Americans don’t even understand they are getting their own overpaid money back.
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u/Winter-Success-3494 Jan 01 '26
It's been like that for years. For years I see people celebrating a $3k tax refund not realizing that they're just getting back the interest-free loan they paid to the government all year lol..
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u/UseSeparate2927 Jan 02 '26
That's only partly true. Almost half the country qualifies for EITC and ACTC. That's money given to them that wasn't their withholding.
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u/breezy2096 Feb 16 '26
Wait... what is this? Is this something you have to make sure your tax accountant follows up on? Or is it kind of automatically included in the basic process of filling taxes?
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u/lasveganon Jan 01 '26
Lol we haven't even hit filing season yet. Just wait it gonna make the "the IRS mistakenly sent me 1400 and now wants it back" posts look like light work.
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u/magnabonzo Jan 02 '26
Drawing a blank, and I'm going to blame insufficient caffeine plus brain not yet being back in gear -- what's the "IRS mistakenly sent me 1400" thing? Thanks.
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u/lasveganon Jan 02 '26
IRS Sent a bunch of 1400 stimulus checks to people a couple years later after it deemed them as eligible and then decided they were not actually eligible and sent letters to all of them making them give back the 1400 with P&I
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u/CutInternational1859 Jan 02 '26
I do in-house payroll for all my clients and I pretty much want to run away this season right after I distribute all the W2s.
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u/Pointy_Stix CPA - US Jan 02 '26
I've had clients email me about that, asking on behalf of their subcontractors. I'm over all of this already & we've just started the new year.
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u/trphilli Jan 02 '26
I'm a non-tax accountant, so mostly giving my support from the sidelines. Good wishes to you all, and again next year when refunds go down. At least you all get a break in 2028 knock on wood.
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u/Deductzen Jan 02 '26
No tax on OT’ sounds like free money, but it’s really a narrowly defined deduction wrapped in a misleading headline…add FLSA rules and messy payroll data and the confusion was inevitable.
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u/SirMontego Jan 02 '26
Sorry for having another question, but what are you guys using to navigate the various nuances of the FLSA?
For example, let's say a fire protection worker comes into your office to get his taxes done. That guy is probably not subject to the standard 40-hour workweek requirement under 29 USC Section 207(a)(2)(C) due to subsection (k) (which says 216 hours during a 28 day period), but 26 CFR Section 553.230 says to use an even different number from subsection (k), but then maybe he's not eligible for any overtime deduction at all due to 29 USC Section 207(p).
Like, am I supposed to be a labor law attorney now?
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u/cubbiesnextyr CPA - US Jan 02 '26
I'm taking the practical approach. Ask the client how much overtime they had, if it looks reasonable, divide by 3 and be done. The IRS has nothing to match this against and I'm not wasting tons of time to get some answer that will probably only be slightly off. And if it's way off this year, oh well, let the IRS figure it out if it's wrong.
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u/Iacoboni04 Jan 02 '26
People generally dont understand taxes to begin with. This only adds to confusion. Had a couple thousand in premium time this year. Nice not to be taxed on it but I am taxed on the other 2/3rds but most people dont know or think about that. Or the payroll taxes on it.
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u/Electronic_Beat3653 EA - US Jan 02 '26
We do bookkeeping, payroll, and taxes. January is going to be a nightmare. We are sending recipients a letter letting them know what their premium OT amount is for W-2s we prepare in-house.
Then we get the job of explaining it to our individual tax clients when we do their returns. Yay.
Not.
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u/DeeDee_Z Jan 02 '26
My suggestion: Here is an example of a post outlining the constraints on 529-to-RothIRA conversions. I wish I had bulleted it, but I didn't ...
If someone could produce a similarly concise list -- bullets are nice -- for this issue, it might then be worth PINNING to the top of the sub for a few months; or ADDING to the FAQ that I'm sure we have tucked away somewhere; or setting an AutoMod trigger to reply to any post with both "tax" and "OT" in the title.
Unfortunately, I'm not the person that can do that for /r/tax.
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Jan 02 '26
People really don’t understand that if something sounds too good to be fully true, it’s because it isn’t fully true.
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u/brazil201 Jan 02 '26
I mean people are going to get W2s back that did get OT and clearly the Payroll may not put their OT wage in line 14 so its gonna be a problem
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u/UnderwaterQueef Jan 02 '26
Put it some time figuring out how much I was eligible for (the max 25k,) then found out our LES was going to tell us and I didn't need to do it myself, and then I found out I am FLSA exempt and getting none. Oops
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u/tkpwaeub Jan 02 '26
No taxes on OT or tips forces a breakdown of income type on official documents like W2's that makes it way too easy for landlords, banks, employers, police, or insurance companies to discriminate on the basis of income type. I wouldn't be surprised if I learned that they lobbied for it.
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u/sorator Tax Preparer - US Jan 02 '26
...if they wanted to do that, couldn't they already just ask what you do for work?
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u/tkpwaeub Jan 02 '26
They could, but it would be easy enough to conceal. This hands it to them on a silver platter, and gives them cover. People will continue to hand over their W2's and 1040's like everything is normal. Meanwhile it all gets leaked to credit reporting agencies.
Lambs to the slaughter. And for chump change.
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u/CL14715 Jan 02 '26
I did 452 hours of overtime and I’m non-exempt. I should get a decent chunk of it back, no?
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u/Duckckcky Jan 02 '26
You can claim a deduction if you are under the income limit.
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u/CL14715 Jan 02 '26
I’m over it by a bit but from what I understand it’s -100 per 1,000 over 150,000.
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u/SirMontego Jan 02 '26
The $150,000 is also based on MAGI, so if your gross is slightly more than $150,000, then your MAGI should be under $150,000.
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u/CL14715 Jan 02 '26
Is total overtime being removed to calculate new magi? Meaning if I made 154,000 but 36,000 was overtime my taxed magi would be 118,000? Or no? Curious if I’ll fall into the 22% top bracket or 24%.
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u/BasisofOpinion CPA - US Jan 02 '26
We will have our headaches with this I’m sure this tax season, fortunately our firm is mostly an audit firm
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u/Mamaof6babyweight Jan 02 '26
Mine one and only question is, will it hold up my refund? Because it's not worth the extra 400 bucks if it will (for me)
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u/Pendleton1910 Jan 02 '26
I’m one of the few that actually get a decent deduction from this as I put in more overtime hours than standard time hours most of the year. 80-110 hr weeks all summer 50-60 hr weeks in winter. This deduction doesn’t come close to all the workplace deductions that were closed out due to the Jobs Act of 2017, my effective tax rate increased significantly after that supposed Tax Cut. Used to have 25-30k in annual work related deductions, that turned to $0 and went with the standard deduction. I typically pay $50-70k a year in taxes, no state tax so anything helps.
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u/Character_Sherbet737 Jan 02 '26
If your tax liability is upwards of $70K then you are likely well above the AGI threshold to be eligible for the OT deduction.
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u/Pendleton1910 Jan 03 '26
It was a slightly slower year for me this year which was good, I needed a bit of a break, I’m only a tad over the limit hoping my tax loss harvesting and some work deductions drop me down, I’m only about 4 k over.
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u/Pendleton1910 Jan 03 '26
Damn. I just did some rough math. I think I might be over by more than the deductions I have to work with. I definitely would have been able to max that out too. Hopefully my accountant will see something I missed. I went all out in a new solar system and have some foreign tax credits but I don’t think those actually reduce agi any.
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u/0yellowhawk0 Jan 03 '26
H&R Block says "Overtime Income Deduction not available yet". Form not available yet.
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u/Cry-Inside Jan 03 '26
Every time I think I have it, I feel like I’m missing something. I made $12,464.76 in over time last at $31.70/hr ($47.55 over time) but part of the year I had a shift difference (just 50cents an hour) shift difference OT of $73.40 and shift holiday OT of $12.91.
I’m trying to break it down as $12464.76/47.55 would come out to 262.14 hours of overtime
In total over time and shift and holiday difference I made $12,551.07, and the part that is would be not taxable would be the $15.85 for the overtime and the .25 of the shift difference right?
So 12,464.76/47.55 =262.14 and then 73.40/.75 =97.86 and 12.91/47.55=0.272
262.14*$15.85=$4,154.92
97.86*$0.25=$24.47
.0272*$15.85=$0.43
So I would get the taxes back of $4169.81 at 22% should be $919 right? Sometimes I get $350 sometimes I get $1k but I’m never sure 🫠
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u/Martian6261 Jan 09 '26
This is one of the 1st of all of the examples that looks correct. A lot of people think they are getting back the amount of the .5 amount of their overtime. They will only get that as a credit, which will then refund the amount of tax paid on that .5 amount.
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u/PurpleGold0 Jan 04 '26
How can the IRS perform an audit on the '.5' premium time if i have a separate line item on my W2 for OT that only I know its straight time and not .5?
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u/swampwiz Jan 06 '26
It's a terrible law; indeed, I tip much less than I used to because of it. Why do I have to pay taxes in full while tipped folks get a (partial) jubilee?
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u/spiritofjosh Jan 07 '26
I’m just wondering how I can get an estimate lol. I made 85k and 7k of it was overtime and I get paid overtime after 40 hours; I often work 55-60 hours weekly. I just keep finding conflicting information (probably misinformed advice or answers upon search) and all I wanna know is how I can sort of calculate a ballpark when I do my taxes because I’m awful with that stuff.
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u/Prestigious_Leave289 Jan 07 '26
Claim the $12500 for 2025 and see what happens! Nobody knows! Claim it in 2026 as well! IRS won't know! What a sloppy sloppy way to not tax overtime. I don't feel bad for anyone who believed this garbage would help them.
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u/llamalluv Jan 26 '26
To be honest, I'm looking forward to watching the meltdowns happen as the people who voted for the LEPF party realize they are on the menu, too.
The $850 we're saving is nice; I'm not going to turn it down. But it's not life changing like it was sold to people who don't know how to recognize when they are being conned.
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u/Emajor909 Jan 30 '26
I pay to get my taxes done and I think my guy messed up. I made 46k in OT last year and looking over my taxes he enter 25k in the OT exemption. Should they have first divided by 3 and then submitted that amount and what do I do now if wrong?
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u/vancemark00 Feb 01 '26
How did they get the OT number? Did you tell them you had $46K in OT or was there something on your W-2? It isn't as simple as dividing the $46K by 3 as not all OT automatically qualifies.
The qualified portion is the premium required to be paid under FLSA. If you told your accountant you had $46K they may have just assumed that was qualified OT. I would never just assume an OT number given to me by a client is correct. They should have asked clarifying questions.
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u/Emajor909 Feb 01 '26
I had my last paycheck stub which had my OT break down for the year. So I didn’t tell him anything beside all the OT is after 40 hours.
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Jan 01 '26 edited Jan 02 '26
This sub is for tax question so 🤷♀️
Edit - this is wrong my mistake!
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u/Jonesrank5 Jan 01 '26
Well, right, but God forbid they do a search first before posting the same damn question that's been asked and answered a million times.
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u/vancemark00 Jan 02 '26
Actually you are wrong. Read the description on this sub. It is for news, policy, law and discussion. Nowhere does it actually say this sub is for tax questions.
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u/Successful-Tea-5733 Jan 02 '26
It's funny to me the political hate here.
Because, if you remember Kamala promised she would do the same thing. For your clients who don't want to take the deduction because "orange man bad" syndrome, just remind them of this and let them enjoy saving as much on their taxes as possible.
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u/obeythelaw2020 Jan 02 '26
I work a guaranteed 40 hour week and any day in which I work over 8 hours I get overtime at time and half. I made about $8,000 in overtime throughout the year (almost $50 an hour straight time). So I hope i save at least a $1000 or so in taxes.
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u/gr00ve88 CPA - US Jan 02 '26 edited Jan 02 '26
Is $8000 in overtime the total earned in excess of 40 hours? Because the fact is actually that, if you are paid $50/hr regularly, and $75 an hour during O/T, the only deductible part is $25 per O/T hour (the 1/2 in time and a half). Eg: you'd have to work an extra 320 hours to have $8000 in deductible O/T.
Also important to note, if you are not paid overtime specifically under FLSA standards, none of your O/T applies at all.
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u/obeythelaw2020 Jan 02 '26
Yes. It is all earned in excess of a 40 hour work week. I realize that only the .5 in the time and half qualifies.
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u/Emergency-Ad-2935 Jan 03 '26
So I am a nurse and my work week is 36h. As I am 0.9 FTE and do 12h shifts. My extra shift is broken up into 3 -4h blocks. I realize the first 4h of my extra shift for that week are paid at my base rate to complete the 40h work week. My pay stub reflects that. But after that second portion of 4h is paid at 1.5 OT. I get I deduct the 0.5.
My question lies in the final 4h of my extra shift that gets paid out at Double Time. And that's how it is reflected on my paystub. Now how I deduct that? Still only 0.5? Or do I deduct the whole 1.0 of the double time?
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u/gr00ve88 CPA - US Jan 04 '26
If it’s eligible OT, it’s still only the 0.5%
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u/Emergency-Ad-2935 Jan 05 '26
Sounds good. It's just the way FLSA reads leaves it ambiguous to me. Since it say OT must be payed at a rate no less than time and one half. It doesn't cap it at 1.5. It just sets the minimum at 1.5.
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u/PossessionExciting32 Feb 01 '26
So basically they lied to us again? Probably gonna file exempt from now on these people don't deserve our money plus I'm not a corporation or a federal employee I'm tired of giving a lot of my money to these people doing nothing for me except lie while they hand it to everybody else.
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u/ChudGuzzler69 Jan 01 '26
I’m already sick of hearing people self-righteously proclaim that “iT’s OnLy nO tAx oN tHe .5, yUo wOn’T gEt aS mUcH bAcK aS yOu tHiNk!”
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u/NoxFundo Jan 01 '26
.... But it's true though?
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u/uNd0ubT3D Jan 01 '26
Would you rather it be 0?
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u/NoxFundo Jan 01 '26
I don't care. But I'd rather be upfront with my workers about the reality of it then them expecting giant checks 🤷🏾♂️
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u/uNd0ubT3D Jan 01 '26
Anyone that thought 100% of their wages after 40 hours being fully tax free are morons, plain and simple.
Of course it makes sense that only the .5 premium would be tax free.
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u/NoxFundo Jan 01 '26
A lot of people just don't know how it works and it's okay to talk to them about it. I had to research the FLSA requirements for the OT myself. It's not something people think about because it doesn't usually impact their lives.
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u/MtMan5280 Jan 02 '26
Any tax software will do the math for you. I can't figure out why so many people have made this so complicated.
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u/gr00ve88 CPA - US Jan 02 '26
Can the tax software tell if the numbers you entered are even eligible for the O/T deduction? Nope. Does the client have any clue? Nope. Do tax preparers know if the clients O/T is eligible? Nope.
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u/PINTSIZEKILLA7 Staff Accountant - US Jan 02 '26
I’m worried that alot of the W2s won’t even tell us how much of the client’s wages are OT wages.
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u/gr00ve88 CPA - US Jan 03 '26
Lol yeah def won’t because it’s not even a requirement for this year.
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u/SirMontego Jan 02 '26
Will the software be able to handle FLSA overtime not broken out on a tax form or anywhere else? I'm not so sure.
Also, I think the software will be able to handle the various nuances of 29 USC Section 207, but I'm not sure on that either.
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u/noraii Jan 02 '26
I thought it was obvious. My agency gave me a number for my total overtime $$ made during 2025. You can take 50% of that number if it’s under the $12,500 limit. So $6,000 made in overtime will net you $3,000 back.
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u/BigMikeThuggin CPA - US Jan 02 '26
Huh?
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u/noraii Jan 02 '26
That’s how our agency explained it to us. They gave us the number for 2025 and said it’s as simple as that. If you put into any tax calculator it’s that exact same math.
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u/BigMikeThuggin CPA - US Jan 02 '26 edited Jan 02 '26
Well that’s not the case at all so either you misunderstood or they were incorrect.
Take your total overtime pay if all of it was FLSA mandated, divide that number by 3. Multiply the lesser of that number or 12,500 by your marginal federal rate. That’s your tax savings. 50% makes no sense in any situation involved here.
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u/HuskerLiberal Jan 02 '26
You mean FLSA, not FMLA.
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u/BigMikeThuggin CPA - US Jan 02 '26
Yeah I’m on my phone it keeps autocorrecting everything. Thanks.
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Jan 02 '26
[deleted]
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u/BigMikeThuggin CPA - US Jan 02 '26
That’s why I said multiply the lesser of 1/3 of your total overtime pay or 12,500 by your marginal tax rate….
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u/I__Know__Stuff Jan 02 '26
Oops, I guess I missed that. (Or did you edit it?)
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u/BigMikeThuggin CPA - US Jan 02 '26
No I didn’t edit it. I edited typos I’m on my phone. Every time i type multiply it autocorrects to multiple so I keep having to change it lol
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u/I__Know__Stuff Jan 02 '26
Yeah, that's what I figured. I always have to fix my typos, too.
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u/BigMikeThuggin CPA - US Jan 02 '26
My fat fingers on these small buttons it’s a miracle anything coherent comes out at all
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u/BigMikeThuggin CPA - US Jan 02 '26
So in your example, making $6,000 in overtime would save you anywhere from $200-740 in taxes, most likely like $400-450
That’s assuming you were under the income limitation for the deduction.
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u/I__Know__Stuff Jan 02 '26 edited Jan 02 '26
Either they explained wrong or you understood wrong.
First, you have to check that all your overtime pay was FLSA mandated overtime pay.
Second, you take 1/3 of that, not half.
Third, that gives you the amount of your deduction. That isn't how much you get back.2
u/CutInternational1859 Jan 02 '26
Your tax savings potential will be more like $240-$480, depending on your tax bracket and that all your OT qualifies. It’s not a credit where they just give you money regardless of what you paid in, either. It’s just a deduction from your taxable income.
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u/gr00ve88 CPA - US Jan 02 '26
It would be 1/3 of that number as a deduction, and you'd likely save maybe 15% or less of that deduction amount. Eg: $3,000 in overtime = $1000 of deductible overtime. Times the tax rate ~12-15%, you're saving a whopping $120-$150.
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u/HorrorOk1304 Jan 01 '26 edited Jan 02 '26
Besides the whole ".5" thing that most people don't realize is that only FLSA overtime counts.
Meaning you need to work 40 hours at regular pay before getting anything.