IRS Clarifies 'No Tax on Overtime' Deduction Rules for 2026 Tax Year, Easing Worker Calculations
The Internal Revenue Service (IRS) has updated its guidance regarding the 'no tax on overtime' deduction, aiming to simplify the process for workers claiming this tax break for the 2026 tax year. This deduction, part of President Trump's One Big Beautiful Bill Act signed in July 2025, allows eligible workers to deduct a portion of their qualifying overtime pay, up to $12,500 for single filers and $25,000 for married couples filing jointly. For the 2026 tax year, employers will be mandated to include the eligible deduction amount on workers' W-2 forms in box 12, using a 'TT' code. This change is expected to alleviate the burden on taxpayers, who previously had to calculate their own eligible amounts for their 2025 returns, often relying on payroll statements or final pay stubs. The deduction specifically applies to the 'overtime premium'—the one-half portion of the 1.5 times regular pay rate for hours worked beyond 40 per week, as defined by the Fair Labor Standards Act. The tax break begins to phase out fo... 
