Tie-Out Press

What counts as qualified overtime, and what does not

Tie-Out Press · Current as of 19 October 2026.

Qualified overtime compensation is the overtime pay that section 7 of the Fair Labor Standards Act required, and only the part of it above the regular rate: the half in time and a half (IRC §225(c)(1); IRS Fact Sheet 2026-13, Q12). Pay the FLSA did not require is not qualified, whatever the pay stub calls it, because only the amount minimally necessary to satisfy 29 U.S.C. §207 counts (FS-2026-13 Q16). That one test settles most of the cases below. The rest turn on who is covered, what counts as an hour worked, and what goes into the regular rate.

The cases, in one table

Double time

FS-2026-13 Q16 works it. At $20.00 an hour for 50 hours, an employer paying double time pays $400.00 for the 10 overtime hours. The FLSA required $300.00: $200.00 of straight time and $100.00 of half-time premium. The qualified amount is $100.00, and the other $100.00 is overtime the FLSA did not require. The same test runs for any premium above time and a half, whether a contract or a policy set it.

Holiday pay, and a holiday worked

Two different things share the word. Pay for a holiday not worked is not compensation for hours of employment. It is excludable from the regular rate, "no part of such payments may be credited toward overtime compensation due", and the paid hours do not push the week past 40 (29 CFR 778.218(a)). A payroll that starts overtime at 40 paid hours pays a premium the FLSA never required whenever a holiday falls in the week, and that premium is not qualified. A holiday that is worked is different. The premium paid for it is one of the fact sheet's own examples of a non-FLSA premium, "hours on a weekend or holiday", and what qualifies is the half-time premium the FLSA required for hours worked over 40, not the holiday premium above it (FS-2026-13 Q16, Q12).

Exempt, salaried, and owners

An FLSA-exempt or non-covered employee has $0 of qualified overtime regardless of what they are paid or what state law requires (FS-2026-13 Q1, Q4). A salary is not an exemption. A salaried nonexempt employee is owed FLSA overtime, computed under 29 CFR 778.113 where the salary covers a fixed workweek and under 778.114 where it covers fluctuating hours; the two give different premiums on the same salary, and under 778.114 the rate is recomputed every week. The fact sheet does not address the fluctuating-workweek method by name, so its treatment is a documented assumption in our rules reference. A person holding 20% or more of the equity who is actively engaged in management is a bona fide exempt executive and has none (Q5).

State daily overtime, California included

The first example FS-2026-13 Q16 gives of a non-FLSA premium is "hours beyond 8 on a workday". Daily premiums are excludable from the regular rate and creditable toward the weekly FLSA requirement (29 U.S.C. §207(e)(5) and (h)(2); 29 CFR 778.202), and where they are credited, the qualified amount is the portion of them credited, and only that portion, plus any additional FLSA premium (Q12). One case the fact sheet does not work: a four-by-ten schedule of exactly 40 hours carries eight hours of daily premium under California law and, on our reading of Q12's formula, no qualified overtime, because there are no hours over 40. The rule is cited; that worked case is a documented assumption in our rules reference, not settled guidance.

What goes into the rate

A shift differential is not qualified overtime, and neither is a bonus, but both change the figure, because the regular rate is not the hourly rate. Shift and nightshift differentials must be included in the regular rate (29 CFR 778.207(b)). Nondiscretionary bonuses are included, and a bonus paid later is apportioned back over the workweeks it was earned in (778.208, 778.209). A tipped employee's regular rate includes the tip credit, not the cash wage alone (29 CFR 531.60). Each raises the rate, and so the half-time premium on it. The arithmetic is in tables on the half-time premium, worked, and the steps in order are on how to calculate qualified overtime compensation.

Which year, and how much

Each premium belongs to the year of its pay date, not the year it was worked (FS-2026-13 Q3). Compensatory time produces qualified overtime when it is taken as leave or paid out, not when it is earned (Q18). The employer reports the year's total in box 12 under code TT, in full, even where it exceeds the $12,500 deduction cap (Q10). The figure is smaller than the register's overtime line by construction, which is the subject of why the code TT figure is smaller than your overtime pay, written for the employee who asks.

The Qualified Overtime Kit, TY2026 edition, is an Excel workbook built to the 2026 Form W-2 instructions for reconciling box 12, code TT; the free spot check works one employee's workweek.