Your Thanksgiving Time and a Half Is Probably Not “No Tax on Overtime.” The IRS Says So in Question 16.
If your employer pays time and a half for working Thanksgiving, that extra pay is almost certainly not deductible under the new “no tax on overtime” rule. The IRS spelled this out in its August 2026 fact sheet. Only overtime that federal law requires counts, and federal law does not require anything extra for working a holiday. The deduction applies only when holiday-week hours go past 40.
I run a free time-and-a-half calculator with a page for each major holiday, and writing those pages meant reading the new IRS guidance line by line. A 1.5x line on your paycheck looks like overtime. For tax purposes it often is not.
What the IRS actually wrote
The current guidance is IRS Fact Sheet FS-2026–13, issued in August 2026. It replaced the January FAQ that most articles still quote. Question 1 sets the rule: “Overtime compensation not required by the FLSA is not eligible for the deduction.”
Question 16 covers premiums employers pay on their own initiative or under a union contract. It lists “hours on a weekend or holiday” by name as a premium for different hours. For those, “only the amount minimally necessary to satisfy 29 USC § 207 is qualified overtime compensation.”
Section 207 of the Fair Labor Standards Act requires time and a half for hours over 40 in a workweek. It says nothing that turns a holiday into overtime. The Department of Labor says the same: the FLSA “does not require payment for time not worked, such as vacations or holidays,” and holiday benefits are “a matter of agreement between an employer and an employee.”
So the holiday premium comes from your handbook or your contract. The tax deduction follows the federal statute, so it only sees hours past 40.
Three Thanksgiving weeks at $20 an hour
Same worker, same employer, which pays 1.5x for hours worked on Thanksgiving. The only change is how the week falls.
Thanksgiving week — Hours worked — Holiday premium — FLSA overtime hours — Qualified overtime (deductible)
A. Works the holiday, 40 hours total — 40 — $80–0 — $0
B. Paid holiday off, picks up a Saturday — 40 worked, 48 paid — $0–0 — $0
C. Works the holiday, 48 hours total — 48 — $80–8 — $80
Week A pays $880: 40 hours at $20 plus $10 extra for each of the 8 Thanksgiving hours. All of the extra $80 is holiday premium, none of it is FLSA overtime, and none of it is deductible.
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Week B surprises people. The paid day off adds 8 hours to the check but none to the overtime count, because the FLSA counts hours worked, not hours paid. Forty-eight paid hours produce zero overtime.
Week C is the only week with a deduction, and the deduction comes from the 8 hours over 40, not from the holiday. The required premium is $10 an hour on those 8 hours, so $80 qualifies. Your employer has two legal ways to pay for that week. It can pay the holiday premium and the overtime premium on top of each other, for $1,120. Or it can count the holiday premium toward the overtime it owes, which 29 U.S.C. § 207(h)(2) allows, for $1,040. Either way the qualified amount is the same $80.
At the 12% bracket, that $80 deduction is worth $9.60. At 22% it is $17.60.
The whole holiday season
Now say you work 8-hour shifts on Thanksgiving, Christmas Eve, Christmas Day, New Year’s Eve and New Year’s Day. Your employer pays 1.5x on all five, and each one falls in a week of exactly 40 hours. You earn 5 × $80 = $400 in holiday premium, and $0 of it is qualified overtime.
If you were counting on deducting that $400 at the 22% bracket, you expected about $88 back that the law does not give you. It is not a fortune. It is still the kind of gap that turns into a surprise in April, especially for retail, grocery, hospital and warehouse workers whose holiday schedules are built around these days.
Where you will see it: your 2026 W-2
This is the first year the mistake will show up on paper. Starting with tax year 2026, employers must report qualified overtime on Form W-2 in box 12 with code TT (FS-2026–13, Q10). And for 2026 onward you cannot deduct more than what is reported there (Q20). The 2025 relief that let workers figure the number themselves is gone.
Your code TT amount should cover only the premium on hours over 40. If it looks too low, check whether you actually worked more than 40 in your holiday weeks. If it looks too high, your employer may have lumped holiday premiums in, and the fix is a corrected W-2c from them (Q11).
What to do before the holidays
Check your handbook for the holiday multiplier, then count your hours for the week, not the day. If the week stays at 40 or under, the holiday premium is ordinary wages: nice to get, taxed like everything else. If you go over 40, only the half-time premium on the hours past 40 counts toward the deduction.
To see what a Thanksgiving shift pays at your rate, plus the federal rules on holiday pay and overtime, I put it on one page: is Thanksgiving time and a half? It runs in your browser with no signup.
This is general information from the IRS and DOL documents linked above, not tax advice. Payroll can tell you how your employer handles holiday weeks. Your W-2 box 12 will show what they reported.
