What code TT is
Starting with the W-2 you receive in January 2027 for tax year 2026, employers report a new item in Box 12: code TT, "total amount of qualified overtime compensation." It exists because of the No Tax on Overtime deduction created by the July 2025 tax law, which lets you deduct up to $12,500 ($25,000 married filing jointly) of overtime premium from your federal taxable income for tax years 2025 through 2028.
The IRS needed a standard place for employers to report the deductible number, and Box 12 is where W-2 codes live. TT sits alongside the other new codes from the same law: TP (cash tips reported to the employer — explained here) and TA (employer contributions to a Trump account).
What the number actually includes
This is the part that surprises people. Code TT is not your total overtime pay. It's only the premium — the extra half of time-and-a-half — on overtime that federal law required your employer to pay.
Say you earn $24 an hour and worked 200 overtime hours this year at $36 an hour. Your total overtime pay was $7,200. But $4,800 of that was your regular rate for those hours, which was always taxable. Only the $12-an-hour premium, $2,400 total, is qualified overtime compensation. That's what shows up as code TT.
The IRS formula employers use: hours over 40 in a workweek × one-half × your regular rate of pay. If your employer pays double time, only the half-time portion that federal law requires counts. If you get overtime after 8 hours in a day because of a state law or your union contract, hours that aren't over 40 for the week don't count either. Firefighters, police and hospital workers have their own federal overtime thresholds; the premium under those rules counts too.
One more thing the code doesn't change: the TT amount is still included in Box 1 (wages), Box 3 (Social Security wages) and Box 5 (Medicare wages). Your employer still withheld income tax and FICA on it. The deduction happens on your return, not in your paycheck.
Where to enter it
Every major tax program (TurboTax, H&R Block, FreeTaxUSA, TaxAct, TaxSlayer) has a W-2 entry screen with Box 12 fields. Choose code TT from the dropdown and type the amount. The software carries it to Schedule 1-A (Form 1040), Part III, applies the $12,500 cap and the income phase-out, and puts the deduction on Form 1040. You don't need to itemize.
If you use a paper return or a preparer: the amount goes on Schedule 1-A, line 15 (qualified overtime from W-2s), with the phase-out worked on lines 16–21.
What if it's missing or wrong?
For 2026 and later, the IRS is strict: you can only deduct qualified overtime that your employer reported on a properly furnished W-2. If your W-2 has no code TT and you worked federal overtime, ask your employer's payroll department for a corrected W-2 (Form W-2c). A substitute W-2 (Form 4852) that you fill out yourself does not work for this deduction.
For 2025 (the W-2 you got in early 2026), the rules were looser. Employers weren't penalized for skipping the new reporting, and many put the overtime figure in Box 14 or on a separate statement instead of Box 12. If they gave you nothing, the IRS allowed a "reasonable method" — for example, adding up the overtime premium from your pay stubs — for that one year only.
If the TT amount looks wrong (too high because it includes contract overtime, or too low), the same answer applies: talk to payroll and get a W-2c. Don't just change the number on your return.
What it's worth
A deduction saves you your marginal tax rate times the amount. A code TT of $3,000 is worth about $360 in the 12% bracket and $660 in the 22% bracket. The deduction shrinks by $100 for every full $1,000 your modified adjusted gross income is over $150,000 ($300,000 joint), and disappears entirely at $275,000 ($550,000 joint). More on the phase-out.
Calculate your overtime deduction →
Your paycheck vs. your refund
Employers were told to keep withholding normally; they can't reduce your withholding for the overtime deduction unless you file a new Form W-4. The 2026 W-4 has a spot in Step 4(b) where you can enter the deduction you expect, which raises your take-home pay during the year instead of waiting for a refund. If you don't, you get it as a bigger refund when you file.
Frequently asked questions
What is code TT on my W-2?
Your total qualified overtime compensation for the year — the deductible premium on federally required overtime.
Is it my total overtime pay?
No, only the "half" of time-and-a-half. Your regular rate for those hours is ordinary wages.
Does code TT reduce my Box 1 wages?
No. The amount is still inside Box 1. The deduction is taken on your return via Schedule 1-A.
My W-2 has no code TT. Can I still take the deduction?
For 2026 and later, only if you get a corrected W-2 from your employer. For 2025, a reasonable estimate from pay stubs was allowed.
What's code TP?
Cash tips reported to your employer, for the No Tax on Tips deduction. Explained here.
What's code TA?
Employer contributions to a Trump account for you or your dependent. It's not part of the overtime deduction.