11/20/2025
How your Overtime will be reported to you for your 2025 tax return
As the year winds down, preparation for the new overtime reporting rules newly applies to employers. Employers are required to report to employees any “qualified overtime” amounts paid so that the employees may take the new deduction on their personal tax returns this year. The amount may be reported either in Box 14 of the W-2 or in a simple statement from the employer. Employees will be looking for that information to file their return and it should be provided to them by January 31, 2026. You may have heard(incorrectly) that employers are not required to report this information this year, but what actually happened was that the IRS said they will not apply penalties to the employer for failing to report or correctly report the amount. Employers that do not report these amounts will face an employee revolt!
So, what is “qualified overtime”? It is the additional overtime premium paid for hours worked over 40 in a week. For example, if Mary normally gets paid $30 hourly, but gets paid time and ½ for working more than 40 hours in a week, she would get paid $45 hourly for overtime, and only the additional $15 would be reported as “qualified overtime”.
Employers that have not kept specific track of overtime all year are allowed to use a reasonable estimate in 2025, but to qualify overtime must be at least time and ½, and again only the premium qualifies.
Let’s say Mary works 50 hours this week and her pay is:
40 hours @ $30 per hour= $1,200
10 hours overtime at standard hourly rate of $30 = $300
10 hours at overtime premium addition of $15= $150
Total pay $1,650
Qualified overtime $150 (only the premium amount)
This $150 would be reported as “qualified overtime” to Mary by her employer on either Mary’s W-2 Box 14, or in a separate statement from the employer.
