How to Calculate the OBBBA Overtime Premium for W-2 Reporting
OBBBA's overtime deduction is one of the most misunderstood parts of the law. Employees don't deduct their full overtime pay — only the 0.5x premium portion.
The Formula
Qualified OT Premium = Overtime Hours × Hourly Rate × 0.5
That's it. Not 1.5x. Not the total OT pay. Just the half-time premium.
Worked Example
| Item | Value |
|---|---|
| Regular hours | 40 |
| Overtime hours | 8 |
| Hourly rate | $18.00 |
| Regular pay | 40 × $18 = $720 |
| Full OT pay | 8 × $18 × 1.5 = $216 |
| Qualified OT premium | 8 × $18 × 0.5 = $72 |
The $72 goes into W-2 Box 12, Code TT. Not the $216.
Why Only the Premium?
The logic: the employee would have earned the base rate ($18/hr) regardless. The "extra" amount they earn because it's overtime is only the 0.5x premium. OBBBA treats this premium as the deductible portion because it's the amount attributable specifically to overtime status.
Common Mistakes
- Using 1.5x instead of 0.5x: The most common error. This overstates the deduction by 3x.
- Forgetting tipped employees have a different effective rate: Use the actual hourly rate, not the tipped minimum wage.
- Not tracking OT hours separately: You need exact overtime hours per pay period, not just total hours.
Accumulating for W-2
Box 12, Code TT reports the year-to-date total of all qualified OT premiums across every pay period. You need to track this per employee for the entire calendar year.
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