No Tax on Overtime

Important details for employees: 

• This deduction applies only to federal income tax. 

• Ohio State/local taxes and Retirement/Medicare still apply to overtime pay. 

• Only the overtime premium portion (the “half” in time-and-a-half) qualifies. For example, if your regular rate is $20/hour and overtime is $30/hour, the $10/hour premium is included in the reported qualified overtime. 

There will be no immediate change for employees. Taxes on qualified overtime pay will still be withheld throughout the year because payroll systems must follow current IRS withholding rules. The tax deduction is determined by the IRS when filing annual tax returns, not during payroll processing.  

Ohio University’s responsibility is to calculate your total qualified overtime compensation and report it on your W-2. 

Qualified overtime compensation refers to any hours worked beyond 40 hours per workweek, as defined by the Fair Labor Standards Act (FLSA) Section 7. If overtime pay does not meet FLSA standards, it will not count as qualified overtime compensation.  

Only the "extra half" of time and a half pay is reported as qualified overtime compensation on the W-2. For example, if your regular rate is $20/hour and overtime is paid at $30/hour, only the extra $10/hour will be reported on your W-2. 

This tax change does not affect overtime eligibility or pay rates at Ohio University. Existing overtime rules under Policy and Collective Bargaining Agreements remain in place. 

However, not all Ohio University overtime pay can be reported as the qualified overtime compensation. If certain overtime pay does not meet the FLSA definition of qualified overtime compensation, employees will still receive their overtime pay as usual, but those amounts will not be included in the total qualified overtime compensation reported on the W-2.