If my employer lists qualified overtime in Box 14, how do I use that amount when filing my 2025 return?
Executive summary
Employers who put a “qualified overtime” amount in Box 14 of the 2025 Form W-2 are furnishing the separate accounting the IRS says employees may rely on to claim the new overtime deduction; taxpayers use that Box 14 number to determine the portion of overtime pay eligible for the Section 225 deduction when they file their 2025 return (Form 1040) and must follow the IRS’s rules and examples for converting reported overtime pay into the deductible amount (Treasury/IRS releases and Notice 2025-69) [1] [2] [3]. Because 2025 is a transition year with reporting relief, employers may instead supply the amount in another statement or portal, and the IRS has not mandated a uniform Box 14 code or updated W‑2 fields for 2025, so taxpayers should verify what the Box 14 entry represents before claiming the deduction [4] [5].
1. What the Box 14 entry means and whether it’s usable
If an employer reports “qualified overtime compensation” in Box 14 (or furnishes a separate statement), the IRS says taxpayers may treat that separate accounting as satisfying the statutory requirement to claim the deduction for tax year 2025; the Box 14 figure will be the starting point for determining the deductible amount on the 2025 Form 1040 [2] [1]. Employers were encouraged—but not strictly required in 2025—to provide that separate accounting and the IRS gave penalty relief for the transition year, meaning some W-2s will show the amount while others will not [1] [4].
2. How to convert the Box 14 number into the deductible amount (what counts as “qualified”)
The deduction applies only to the overtime premium—the portion paid in excess of the employee’s regular rate that FLSA requires (the “half” of time-and-a-half, or other premium depending on the overtime formula) —not the employee’s entire overtime gross pay [6] [7]. IRS guidance and multiple payroll advisories give examples showing that taxpayers must follow the specific FLSA calculation applicable to their pay period: for straight time plus the premium that creates time‑and‑a‑half, the deductible piece is the premium portion identified by statute and IRS examples, and employers’ Box 14 “qualified overtime” entries are meant to reflect that premium [3] [6].
3. Practical steps to take when Box 14 lists qualified overtime
Treat the Box 14 entry as the employer-provided “qualified overtime” accounting and use it to compute the Section 225 deduction following IRS Notice 2025-69 — if Box 14 shows the premium itself, that number may be the amount to include on the return for the deduction; if Box 14 shows total overtime dollars or uses an unfamiliar label, obtain employer clarification or supporting pay records because the IRS expects employees to make a “reasonable effort” to determine FLSA eligibility and the correct amount if a separate accounting isn’t provided [2] [3] [4].
4. Limits, caps, recordkeeping and pitfalls
The overtime deduction is subject to statutory caps and AGI-phaseouts: the legislation and subsequent tax guidance limit the maximum deduction (practical guides note caps such as $12,500 per individual and $25,000 for joint filers) and impose income-based reductions, so simply plugging the Box 14 number into the return without checking limits may yield an incorrect claim [8]. Because Forms W‑2 and other returns weren’t redesigned mid‑year, the IRS and tax authorities advise keeping pay stubs, employer statements and any Box 14 explanations as evidence of the computation method used [1] [4].
5. Areas of ambiguity and when to get professional help
Significant ambiguity remains for 2025 because the IRS provided relief rather than prescriptive Box 14 codes and full form changes, so employers took different approaches (Box 14, separate statements, or online portals), and examples in guidance vary by pay structure and work period; taxpayers with complex pay arrangements (comp time payouts, alternate work periods like 14‑day cycles, or double-time regimes) should consult a tax professional because IRS examples show different divisors and computations depending on the circumstances [9] [3] [5]. The employer’s obligation is primarily to identify and report the qualified overtime; the individual is responsible for correctly determining and claiming the deduction on Form 1040, consistent with IRS Notice 2025-69 [7] [2].