Why only half your overtime is deductible
The rule covers the premium above your regular rate, not the whole overtime cheque.
The premium is the qualifying part
If your regular rate is $26 and time and a half pays $39, the deductible portion is the extra $13 per hour. The first $26 is ordinary wages and is taxed as such.
Double time doubles the premium
At $52 an hour, the premium is the full $26 above your base rate, so double-time hours generate twice the deduction per hour worked.
Not all extra pay counts
The deduction is limited to overtime required under the Fair Labor Standards Act. Holiday premiums, weekend differentials and overtime required only by state law or a union contract generally do not qualify.
Your W-2 should show it
Employers now report qualified overtime separately. If the box is empty and you worked FLSA overtime, ask payroll before you file rather than after.
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