Overtime Deduction

[parvitstax]

I understand the overtime deduction is new for 2025. 

This is a scenario where payroll did not enter OT pay on box 14. 

I am seeing information about divide by 3 on all 1.5 overtime pay and enter on line 14c. 

I am also seeing other information saying "Overtime - F" (FLSA amount) on a paystub is the deductible amount. 

Can you please help me understand what is the true deductible OT portion? 

[strongsilence]

Only the "premium" portion is deductible.

The AICPA has very good examples.

[parvitstax]

On the client's paystub they have 3 types of overtime:

1. Overtime Pay (which seems to be the 1.5 pay)

2. Double Pay

3. Overtime - F

I have had other clients with Box 14 with OT already calculated which has been very small $ amounts similar to "Overtime - F" on the client mentioned above. Using #1 and #2 above yields very different results (much more refund). 

Can you explain which of these #s above to use to determine the OT deduction? #3 is the entry confusing me since the IRS site states FLSA is deductible and that's what "Overtime - F" represents. 

[strongsilence · Accepted solution]

per AICPA TAX rewind webinar

Qualified overtime — The basics
Definition (Notice 2025-69)

• Qualified overtime compensation is overtime compensation required and paid under 29 USC Sec. 207 that is in excess of the employee’s regular rate (i.e., the premium portion). Only FLSA-eligible employees (covered + not exempt) qualify.
• Up to $12,500 per return ($25,000 joint).
• Begins at MAGI $150k / $300k (same as tips).
• If someone says “I made $15,000 in overtime,” your next question is: “Was that the total overtime line… or the premium portion?” Only the premium portion is the starting point.

The “Premium-Only” concept (time-and-a-half)
If overtime is paid at 1.5× the regular rate:

• Why “divide by 3” shows up in the IRS examples
• If the pay stub lumps “overtime” as the total 1.5× amount (regular + premium), then the premium portion is one-third of that total. That’s why the IRS example uses “divide by 3.”
• Qualified OT (premium) = Total OT line × (1/3) [for 1.5× overtime]

[parvitstax]

I am now seeing that "Overtime-F" on a paystub represents overtime HOURS worked. So my #3 above does not apply in the $ totals to report for the deduction. 

[ljr]

I would use the time and a half number only

[parvitstax]

You can use double overtime too but in that situation you need to divide by 4

[maughact]

According to Lacerte and some other sources I have read that the amount listed in box 14 is already the eligible amount and no need to calculate.  So the full amount is deductible from box 14.  If it's on the pay stub then the calculation is needed.  1/3 of 1 1/2 overtime and 1/4 for double time.

That's my interpretation.