The employee worked 43 hours in one work week, with all hours being time worked. Their regular hourly rate of pay is $23.00/hour and are paid at double time their regular hourly rate of pay for overtime hours. They received $138.00 of overtime pay.

Qualified Overtime Compensation = Halftime Rate x Qualified Hours

Halftime Rate: $23.00 x 0.5 = $11.50

Qualified Hours: 43 - 40 = 3

Qualified Overtime Compensation: $11.50 x 3 = $34.50

Illustration:

Their time for the week is: 8 hours of Holiday pay, 32 hours of Regular Hourly pay, and 2 hours of Overtime pay, which totaled 42 hours. Their regular hourly rate of pay is $25.00/hour and are paid overtime at 1.5 their regular hourly rate of pay. They received $75.00 of overtime pay.

Qualified Overtime Compensation = Halftime Rate x Qualified Hours

Halftime Rate: $25.00 x 0.5 = $12.50

Qualified Hours: 0

*Hours worked were not greater than 40 (32 regular hours+2 overtime hours = 34)

Qualified Overtime Compensation: $0.00 (no qualified overtime compensation is reported)

Illustration:

In Week 1, they worked 45 hours, with all hours being time worked. They are paid $26.00/hour and are paid overtime at 1.5 of their regular rate of pay. For Week 1, they received $195.00 of overtime pay.

Qualified Overtime Compensation = Halftime Rate x Qualified Hours

Week 1 Halftime Rate: $26.00 x 0.5 = $13.00

Week 1 Qualified Hours: 45 - 40 = 5

Week 1 Qualified Overtime Compensation: $13.00 x 5 = $65.00

Illustration - Week 1:

Bi-Weekly Employee - Week 1

In Week 2, they were paid for: 15 vacation hours, 21 regular hours, and 5.5 hours of overtime, totaling 41.5 hours. They are paid $26.00/hour and are paid overtime at 1.5 of their regular rate of pay. For Week 2, they received $58.50 of overtime pay.

Qualified Overtime Compensation = Halftime Rate x Qualified Hours

Week 2 Halftime Rate: $26.00 x 0.5 = $13.00

Week 2 Qualified Hours: 0

*Hours worked were not greater than 40 (21 regular hours+5.5 overtime hours = 26.5)

Week 2 Qualified Overtime Compensation: $0.00 (no qualified overtime compensation is reported)

Illustration - Week 2:

Bi-Weekly Employee - Week 2

Your 2025 total qualified overtime compensation will be reported in the “Benefits and Pay” hub in your Workday account. Once in the hub, click on the down arrow next to “Pay” on the left, then select “2025 Qualified Overtime Amount”, to view your total.

Your Human Resources Coordinator and/or your Human Resources Business Partner will have access to view your total as well.

If you have separated from the University, please email the Payroll Office to request this at: payroll@brown.edu.

This bill applies to federal withholding taxes only.  State, local, and FICA (OASDI/Medicare) taxes and deductions are not impacted by the OBBBA.

No.  Overtime received will still be taxed upon receipt of your pay. The new provision created a deduction to use when filing your income tax return.

No.  You will need to meet the IRS’ qualifications and then use the deduction when filing your personal income taxes.

No, the OBBBA “No Tax on Overtime” provision is only temporarily in effect from 2025-2028.
 

Qualified overtime compensation is strictly the half-time portion (0.5) of time-and-a-half (1.5) of your regular rate of pay (per FLSA) multiplied by qualified hours. Please note:

1. If you earn double time or greater on overtime hours, only the half-time portion (0.5) of time-and-a-half of your regular rate can be used
2. Qualified hours are hours worked in excess of 40 hours worked in a week, which does not include paid time off

You can also review the “No Tax on Overtime” section of the IRS' website for additional information and speak with a tax accountant, if needed

The Payroll Office asks that you view the IRS’ website and review the “No Tax on Overtime” section and speak with a tax accountant, if needed.

Here are some facts to keep in mind when determining your qualified overtime compensation total:

1. Only the half-time portion (0.5) of time-and-a-half of your regular rate can be used. It is determined by FLSA, not by collective bargaining agreements or University policy.
2. Qualified hours are only determined by FLSA and is the time worked in excess of 40 hours worked in a workweek. It does not consider paid time off as hours worked.