W-2 Code TT
Tax Glossary Term
Definition
W-2 Code TT is the Box 12 reporting code for qualified overtime compensation eligible for the IRC Section 225 above-the-line deduction. Mandatory from TY 2026, Code TT reports only the premium portion of overtime pay — not total overtime wages. For time-and-a-half, only the 0.5x premium above the regular hourly rate qualifies; for double-time, the 1.0x premium qualifies. The deduction cap depends on filing status: up to $12,500 for single and head-of-household filers, or $25,000 for married filing jointly. Married filing separately filers are ineligible. For tax year 2025, transitional relief under IRS Notice 2025-69 permits alternative reporting methods, but starting in TY 2026 the Code TT entry in Box 12 is the exclusive reporting mechanism. The dollar amount next to Code TT feeds into Schedule 1-A, Part II, where the taxpayer claims the overtime premium deduction. Only overtime required under the Fair Labor Standards Act (FLSA) or an equivalent state law qualifies. Salaried-exempt employees, independent contractors, and self-employed individuals cannot generate Code TT amounts. FICA taxes still apply to the full overtime pay; the deduction is for income tax only.
Example
Regular rate: $30/hr
Overtime rate (time-and-a-half): $45/hr
Premium portion: $15/hr
200 overtime hours × $15 = $3,000
W-2 Box 12 Code TT: $3,000
Cap (single): $12,500
$3,000 is under the cap, so full amount is deductible
Tax savings at 22.0% bracket: $3,000 × 22.0% = $660