FLSA-Exempt Workers: Why Truck Drivers, Railroad Workers, and Salaried Employees Cannot Claim the Overtime Deduction
The IRC Section 225 overtime deduction offers up to $12,500(single) or $25,000 (MFJ) in federal income tax deductions for qualified overtime compensation. But the word "qualified" carries a specific legal meaning: the overtime must be required by the Fair Labor Standards Act or an equivalent state law. Workers who are exempt from FLSA overtime requirements do not earn "qualified overtime compensation," even if their employer pays them extra for working long hours. This post covers three major groups of workers who fall outside the deduction: truck drivers exempt under FLSA Section 13(b)(1), railroad workers exempt under Section 13(b)(2), and salaried employees covered by the white-collar exemptions.
The FLSA non-exempt requirement
IRC Section 225 defines qualified overtime compensation as the premium portion of overtime pay that an employer is required to pay under federal or state overtime law. The FLSA is the primary federal overtime law, and it requires employers to pay time-and-a-half for hours worked beyond 40 in a workweek for non-exempt employees.
If you are exempt from FLSA overtime requirements, your employer is not legally required to pay you overtime. Any overtime pay you receive is voluntary on the employer's part. Voluntary overtime pay does not meet the IRC Section 225 definition, so it cannot be claimed as a deduction.
Your W-2 reflects this distinction. Starting in TY 2026, employers report qualified overtime premium in Box 12 Code TT. If you are FLSA-exempt, your W-2 should not include a Code TT entry, because your employer has no FLSA-mandated premium to report.
Truck drivers: FLSA Section 13(b)(1)
FLSA Section 13(b)(1) exempts employees of motor carriers from federal overtime requirements when those employees' duties affect the safety of operation of motor vehicles in interstate or foreign commerce. This exemption covers most long-haul truck drivers, many delivery drivers for interstate carriers, and related positions like mechanics who work on vehicles used in interstate commerce.
The practical effect: a truck driver working 60 hours in a week may receive straight-time pay for all 60 hours rather than time-and-a-half for the last 20. The employer is not violating FLSA because the motor carrier exemption removes the overtime requirement. And because there is no FLSA-mandated premium, there is nothing to deduct under IRC Section 225.
Some truck drivers work exclusively within a single state and may be covered by state overtime laws that are broader than FLSA. In those cases, the state-mandated overtime premium could qualify for the deduction, since IRC Section 225 covers overtime required by "Federal or State law." A driver subject to a state overtime mandate would need to verify with their employer whether Code TT is reported.
For more on how the motor carrier exemption affects specific driver categories, see our truck drivers overtime tax guide.
Railroad workers: FLSA Section 13(b)(2)
FLSA Section 13(b)(2) exempts employees subject to the provisions of the Railway Labor Act from federal overtime requirements. This covers most railroad employees, including engineers, conductors, brakemen, and other operating crew members.
Railroad workers' overtime and premium pay are governed by collective bargaining agreements negotiated under the Railway Labor Act, not by FLSA. While these CBAs may provide for overtime pay at premium rates, that overtime is not FLSA-mandated. The IRC Section 225 deduction specifically requires FLSA or state-law-mandated overtime, so CBA-negotiated railroad overtime premiums generally do not qualify.
Railroad workers are also subject to the Railroad Retirement Tax Act (RRTA) rather than standard FICA, which creates a different tax framework entirely. The IRC Section 225 deduction addresses federal income tax only, but the underlying FLSA exemption is what prevents railroad overtime from qualifying.
For more details, see our railroad workers overtime tax guide.
Salaried-exempt employees: white-collar exemptions
The FLSA white-collar exemptions cover employees who meet both a salary test and a duties test in one of the following categories:
- Executive: Managers who supervise two or more employees and have hiring/firing authority
- Administrative: Employees performing office work related to management or business operations, exercising independent judgment on significant matters
- Professional: Employees in roles requiring advanced knowledge in a specialized field (attorneys, engineers, architects, physicians, accountants)
- Computer employee: Systems analysts, programmers, and software engineers
- Outside sales: Employees whose primary duty is making sales away from the employer's fixed location
Workers who meet both the salary threshold and the duties test for any of these categories are exempt from FLSA overtime. Their employer is not required to pay them time-and-a-half, and any overtime compensation they receive is voluntary. This voluntary overtime does not produce a "qualified overtime compensation" amount under IRC Section 225.
For a deeper analysis of the salaried-exempt distinction, including scenarios where salaried workers are non-exempt, see Can Salaried Employees Claim the Overtime Deduction?
What about voluntary overtime pay?
Some employers pay overtime to exempt workers as a matter of company policy, union agreement, or employee retention. A salaried manager might receive time-and-a-half for hours beyond 45. A truck driver's employer might pay an overtime rate even though FLSA does not require it.
This voluntary overtime pay is still taxable income, but it does not qualify for the IRC Section 225 deduction. The statute requires that overtime be "required by Federal or State law." Employer-initiated premium pay, no matter how similar it looks to FLSA overtime, falls outside the scope of the deduction.
The one exception is state law. If a state overtime statute covers workers who are exempt under federal FLSA, the state-mandated premium qualifies. For example, some states require overtime for truck drivers on intrastate routes even though FLSA Section 13(b)(1) would exempt them at the federal level. In that case, the state-mandated premium is deductible.
Who CAN claim the deduction
The overtime deduction is available to workers who are FLSA non-exempt (or non-exempt under state law) and earn overtime premiums. This includes:
- Hourly production and manufacturing workers
- Construction and skilled trades workers (electricians, plumbers, carpenters)
- Retail and food service hourly employees
- Police officers and firefighters (under FLSA 7(k))
- Healthcare hourly workers (nursing assistants, medical technicians)
- Salaried workers who are below the FLSA salary threshold or whose duties do not meet an exemption test
If you are unsure about your FLSA status, check your W-2 for Box 12 CodeTT. If your employer has reported a Code TT amount, they have identified qualifying overtime premium. If no Code TT appears, it may be because you are exempt or because your employer has not yet implemented the reporting (check whether TY 2026 has passed).
To estimate your overtime deduction if you do qualify, use the no tax on overtime calculator. For the complete overtime deduction rules, see the No Tax on Overtime: Complete 2026 Guide.