Why fire and police are different
The Fair Labor Standards Act normally requires overtime after 40 hours in a week. But section 7(k) gives public-agency fire protection and law enforcement employees a partial exemption: departments can set a "work period" of 7 to 28 days and owe overtime only when hours exceed a federal ceiling for that period. The ceilings are:
| Work period | Fire protection | Law enforcement |
| 7 days | 53 hours | 43 hours |
| 14 days | 106 hours | 86 hours |
| 21 days | 159 hours | 129 hours |
| 28 days | 212 hours | 171 hours |
Most departments pay overtime more generously than this, because the union contract says so — after 40 hours, or after each 24-hour shift, or after the scheduled 48 or 56. That extra generosity is exactly the problem for the deduction.
The IRS position
The No Tax on Overtime deduction covers only "qualified overtime compensation": the premium above your regular rate that is required by section 7 of the FLSA. The IRS's official Q&A (FS-2026-13, Q17) specifically addresses employees whose overtime is determined by a provision of section 7 other than the standard 40-hour rule, and names "public sector employees in fire protection and law enforcement." Their overtime is qualified when compensation determined under that provision exceeds the regular rate — in other words, the premium on hours over the 7(k) threshold.
Overtime paid under a collective bargaining agreement below the 7(k) threshold is not required by federal law, so it's not qualified. Same for daily overtime or shift-trade overtime that a contract grants but the FLSA doesn't.
A firefighter example
The Government Finance Officers Association gives a clean one. A firefighter's department uses a 7-day work period and pays time-and-a-half after 50 hours. He works 56 hours one week. The contract pays 6 hours of overtime (hours 51–56). But the federal threshold is 53 hours, so only hours 54–56 are FLSA overtime. The deductible premium is the "half" on those 3 hours, not 6.
On a 28-day period it works the same way: if you worked 224 hours and the department paid overtime above 212, all 12 hours' premium qualifies. If it paid overtime above 192 (a 48-hour contract week), the premium on hours 193–212 doesn't count and the premium on 213–224 does.
A police example
An officer on a 28-day period with a 171-hour threshold works 180 hours including court time and a special event. The contract pays overtime after 160 (four 40-hour weeks). The federal deduction covers only the premium on hours 172–180: nine hours. The premium on hours 161–171 is contract overtime.
The good news: the regular rate for the premium calculation includes longevity pay, shift differentials and educational incentives, so the deductible "half" is bigger than half your base rate.
Comp time, court time, details
- Comp time isn't qualified overtime when earned. When you cash it out, the payout is qualified — but only the premium portion, which for time-and-a-half comp time is roughly one-third of the check.
- Court time and callbacks count toward hours in the work period. Whether their premium is deductible depends on whether they pushed you over the 7(k) threshold.
- Off-duty details paid by a third party through the department are generally not FLSA overtime and don't qualify.
- Volunteer and paid-on-call firefighters who aren't FLSA employees have no qualified overtime.
What your department must report
For 2026, your W-2 shows the qualified amount in Box 12, code TT. Departments have to calculate it under the 7(k) rules, not the contract rules, and many payroll systems were configured for the contract. If your code TT looks like your entire overtime line, ask payroll how it was computed; if it looks like zero and you routinely exceed the federal threshold, ask for a corrected W-2. From 2026 on, you can only deduct what's on the W-2.
For 2025, the IRS accepted a reasonable estimate from your own records if the department didn't report it.
What it's worth
Calculate your overtime deduction →
Frequently asked questions
Do firefighters qualify?
Yes, for the premium on hours over the 7(k) threshold (212 per 28 days). Contract overtime below that doesn't count.
Do police qualify?
Yes, same rule with a 171-hour-per-28-day threshold (about 43 a week).
My contract pays OT after 40. Is all of it deductible?
No. Only the portion required by the FLSA — hours above the 7(k) ceiling for your work period.
Does comp time count?
Only when cashed out, and only the premium portion.
What about EMTs and dispatchers?
Dispatchers and civilian staff are on the normal 40-hour rule. EMS workers count as "fire protection" for 7(k) only if they're part of a fire department and trained in fire suppression; otherwise, the 40-hour rule applies.
Is the deduction affected by my pension contribution or state tax?
No. It reduces federal taxable income only. FICA (where applicable) and state tax are unchanged.