Learn what transportation and logistics companies should know about the new overtime tax deduction and how cents-per-mile pay figures in.
The new federal tax law known as the One Big Beautiful Bill Act introduced a federal income tax deduction specifically for qualifying overtime pay.
The rules for truckers are somewhat complex. Here’s what transportation and logistics companies should know about the new overtime tax deduction and how cents-per-mile pay structure figures in.
Does the new tax law change overtime eligibility for truck drivers?
The new tax law doesn’t change who qualifies for overtime under the Fair Labor Standards Act (FLSA). Drivers exempt under FLSA — which is the case for many interstate truck drivers — remain exempt so don’t qualify for overtime or the deduction.
For non-exempt drivers who earn overtime (typically local or short-haul drivers), only the premium portion of overtime pay (the extra half in time-and-a-half) qualifies for the new tax deduction and reporting rules.
How does cents-per-mile pay structure factor into the new overtime tax deduction?
Paying by the mile doesn’t automatically trigger overtime reporting unless the driver is non-exempt and works more than 40 hours in a week.
If overtime applies, you must calculate the regular rate (convert cents per mile into an hourly equivalent) and then compute the overtime premium. Only that premium portion is deductible and reportable under the new tax law.
New overtime tax deduction compliance checklist for trucking and logistics companies
1. Determine driver classification
- Confirm which drivers are FLSA-exempt (most interstate drivers under U.S. Department of Transportation rules) versus non-exempt.
- Only non-exempt drivers are eligible for overtime reporting under the new tax law.
2. Review pay structure
- Identify if drivers are paid cents per mile, hourly, or a mix.
- For non-exempt drivers paid per mile, calculate the regular hourly rate:
- Compute overtime premium (½ of regular rate × overtime hours).
3. Track overtime premium separately
- Maintain payroll records separating overtime premium pay from base pay.
- Only the premium portion (the extra half in time-and-a-half) qualifies for the new overtime deduction reporting.
4. Update payroll and reporting systems
- Configure payroll software to:
- Track overtime premium separately
- Prepare W-2 reporting for qualified overtime pay
- For 2025:
- Report in Box 14 or attach a statement
- For 2026 onward:
- Box 12 will include:
- Code TT for qualified overtime compensation
- Code TP for qualified tips
- Box 14b will be used to report the Treasury Tipped Occupation Code, identifying employees in occupations eligible for the tip deduction
- Box 12 will include:
5. Employee communication
- Inform employees about:
- The new tax deduction for overtime premium pay
- How it will appear on their W-2
- Provide FAQs or a short guide for drivers
6. Compliance documentation
- Keep detailed records of:
- Driver classification decisions
- Regular rate and OT calculations
- W-2 reporting proof
- Retain records for at least three years per FLSA and IRS requirements.
7. Audit and review
- Conduct quarterly audits to verify:
- Correct classification
- Accurate overtime premium reporting
- Update policies if IRS or U.S. Department of Labor guidance changes.
How CLA can help transportation and logistics companies with the new overtime tax deduction
To meet the new rules, transportation and logistics companies may need to update payroll and accounting systems and adjust their reporting to accurately disclose overtime amounts to employees.
CLA’s talent solutions payroll and HR consultants help companies with a variety of payroll and HR matters. We can review your current processes and help implement any adjustments needed to meet new requirements.