Overtime error coming up because I have 2 jobs

[johnm_75]

I have a second job where I worked overtime, but my wages are not taxable at the federal level because I am a home health care professional taking care of patients who are live-in, which makes my income exempt at the federal level. My first job is taxable federally and I verified online that I am able to use the overtime exemption benefit in my circumstance since my second job has federally taxable income. Is there an update that might come to fix this error in smart check? The error says my box showing overtime should not exceed the box 1 of the same job, but it is not taking into account the second w2. Any help is much appreciated.

[Vanessa A]

That is not an error.  You cannot claim the Overtime deduction for wages that were not included in taxable income for the IRS.  So the overtime on the W-2 with $0 in box one, you would not be able to deduct.  You would need to delete the numbers from box 14.  In order to claim the No tax on Overtime deduction, the income must be included in your taxable income and reported to the IRS.

Since your other W-2 has a number in box 1, you can deduct the OT premium you earned from that employer, but you cannot deduct the OT from your exempt income.  

Note, the premium or the .5 in time and a half is what is deductible, not all of the overtime.  To calculate your overtime deduction you would take your overtime pay per hour minus your base pay per hour and multiple that by your total overtime hours.  If your employer lists your total overtime you can divide that by 3 to get the OT Premium amount.   If you are paid double time you would divide it by 4.  Only the .5 amount is deductible.
So if you work 300 hours of OT and earn $30 per hour for your regular pay and $45 per hour for overtime, you would multiple $15 (45-30) by the 300 hours for a total of $4,500.

Remember, this is a deduction NOT a credit.  This means it will lower your taxable income, which can lower your tax liability.  You will  NOT see a refund in the amount of the OT you enter. The OT is reported on Schedule 1-a, line 14a with the total amount you are qualified for reported on line 21 of Schedule 1-2.

 
To see your form 1040 you can switch to forms mode if you are using TurboTax Online or if you are using the online version you can select Tools>>Tax Tools>> Preview my 1040.

[johnm_75]

Just want to reconfirm, are you saying because I worked overtime for income I was exempt to paying taxes, I can't use that overtime to receive the benefit from the other job that did have taxable income? When I do a search online using AI, this is what it said:

Yes, you can likely claim the overtime credit (deduction) for the job where you are tax exempt, provided you have federal income tax liability from your second job. 

The key factor is your total federal income tax liability for the year, not which specific job the overtime was earned from. 

Here's how it works:

The Deduction Applies to Your Total Tax Bill: The "No Tax on Overtime" provision allows you to deduct up to $12,500 of qualified overtime pay from your total federal taxable income when you file your tax return.  This reduces your overall federal income tax liability.

You Must Owe Federal Income Tax: To benefit from this deduction, your combined income from both jobs must create a federal income tax liability before the deduction is applied. 

Liability from Your Second Job Qualifies You: Even if Job 1 (where you earned the overtime) is tax-exempt, the income and taxes withheld from Job 2 create the liability. The deduction from Job 1's overtime can then be used to reduce the tax you owe on Job 2's income.

Or do I need to update another section within the form that will allow me to receive the overtime deduction for the job that has taxable income even though the overtime was earned by the first job that is tax exempt?

[DianeW777 · Accepted solution]

The tax law is clear when it comes to deductions of almost any kind. Generally, if you are not paying tax on the income associated with a possible deduction, you cannot use that deduction to reduce income from other sources.

If the overtime portion of the income from the exempt activity is not part of  your taxable income, unless they update or change the deduction rules, which would not be unheard of, there will be no overtime deduction for that specific tax exempt income job.

The overtime description is as follows under the One Big Beautiful Bill Act (OBBBA):  'For tax years 2025 through 2028, individuals who receive qualified overtime compensation may deduct the pay that exceeds their regular rate of pay (generally, the “half” portion of “time-and-a-half” compensation) that is required by the Fair Labor Standards Act and reported on a Form W-2, Form 1099, or other specified statement furnished to the individual.' (Tips Received in 2025) 

Your employer must meet specific Fair Labor Standards Act (FLSA) requirements to qualify.  If your employer doesn't meet these qualifications, then you do not have qualifying overtime.

• Qualified Overtime Deduction Rules

When the Fair Labor Standards Act was enacted in 1938, it provided an exemption from the overtime requirements for bona fide executive, administrative, and professional employees.  It is possible that your employer pays this employee benefit but is not required to make the payment under the FSLA. 

@johnm_75