The new boxes on the 2026 W-2.
The 2026 W-2 instructions add box 12 code TP for cash tips reported to the employer and box 12 code TT for qualified overtime compensation. Box 14 is split into 14a and 14b, and tipped workers will see an occupation code in box 14b.
Employers have until February 1, 2027 to furnish 2026 W-2s, because January 31 falls on a Sunday. Restaurants, salons, and other employers around Fuquay-Varina are filling in these boxes for the first time, so it is worth a look before you file.
Which tips count.
The tips deduction covers occupations that customarily and regularly received tips on or before December 31, 2024. The final regulations list more than 70 occupations. Tips must be paid in cash or an equivalent, such as a check, a card, or certain payment apps, and paid voluntarily by the customer rather than negotiated.
Only tips that are reported count: on Form W-2, Form 1099-NEC, Form 1099-MISC, Form 1099-K, or Form 4137 for tips you report yourself. Self-employed people in a specified service trade or business cannot claim the deduction.
Which overtime counts.
Only overtime required by section 7 of the Fair Labor Standards Act qualifies, and only the premium part. If you earn time-and-a-half, the deductible amount is the half, not the full overtime check.
Income limits and filing rules.
Both deductions phase out once modified adjusted gross income passes $150,000, or $300,000 on a joint return, shrinking by $100 for each $1,000 over. You need a Social Security number on the return, and married couples must file jointly to claim either deduction. Both can be claimed whether you itemize or take the standard deduction.
North Carolina does not follow these deductions.
The state return starts from federal adjusted gross income, and the federal tips and overtime deductions come off after that point. Our page on North Carolina and the tips and overtime deductions explains why the amounts stay taxable on the D-400.
COMMON QUESTIONS
Questions you may have.
What does code TT in box 12 of my W-2 mean?
It is the total of your qualified overtime compensation for 2026, the amount your employer reports for the federal overtime deduction.
My W-2 shows no overtime code, but I worked overtime. What should I do?
Ask your employer for a corrected Form W-2c. For 2026, the IRS says no relief is available for overtime that is not reported in box 12 with code TT.
Is the whole overtime check deductible?
No. Only the premium portion required by the Fair Labor Standards Act counts, such as the half in time-and-a-half.
Do I have to itemize to claim the tips or overtime deduction?
No. Both deductions are available whether you itemize or take the standard deduction.