Truck Driver paid by the hour and overtime paid over 40 hours in a week'. Does this Qualify as tax free.

[Vanessa A · Accepted solution]

Yes.  The premium portion of your overtime (the .5) that you earned per hour for hours over 40 hours are what is deductible for the No Tax on Overtime deduction. 

To qualify for the No Tax on Overtime Deduction the following must apply:

• You must be a non-exempt employee eligible for Overtime under the federal Fair Labor Standards Act
• The Overtime must be on hours worked OVER 40 hours.  (if you live in a state where OT pay is required after 8 hours, this does not apply)
• Overtime must be paid at more than your regular hourly rate.  
• Only the amount that is over your regular hourly rate is deductible.  For example,  If you make $30 per hour and are paid OT at $45 an hour, you can only deduct $15 per hour as overtime deduction.
• The deduction is limited to $12,500
• Your filing status cannot be Married Filing Separately
• Your income must be less than $150,000 if you are single or $300,000 if Married Filing Jointly. 

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.

If you are getting the deduction and have income left to reduce, you will see the change to your income on line 11a of your form 1040.  If your AGI is lower than $12,500 your benefit from the deduction will be limited to your AGI before the deduction. 

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.