How to track qualified overtime in 7shifts (OBBBA)
The One Big Beautiful Bill Act (OBBBA) requires US employers to provide employees with their federal Qualified Overtime (QOT) earnings for each pay period and year-to-date total. 7shifts automatically calculates and surfaces these figures in two places: the Worked Hours & Wages report and the Time Clocking Labor Summary.
Things to Know
⚠️ Important: This feature is available to US-based accounts only. Accounts outside the US will not see the Qualified OT columns or checkbox.
- The Qualified OT columns will only display data if your account uses 7punches or a POS labor integration.
- 7shifts automatically backfills Qualified OT data to January 1, 2026. No manual recalculation of early 2026 Qualified OT data is required.
- The Qualified OT calculations are for tax reporting purposes only and do not affect actual employee earnings.
- Tax year allocation follows the date of payout, not the pay period dates. If a pay period crosses a calendar year, 7shifts allocates the overtime to the tax year in which the last day of the pay period falls.
- Applicable for the 2026, 2027, and 2028 tax years only. Reporting requirements under the OBBBA are currently scheduled through December 31, 2028.
Note: For the most accurate Qualified OT data, ensure your overtime setting in Labor and Compliance Settings is set to Regular Rate of Pay. 7shifts does not factor bonuses or other monetary earnings into the regular rate of pay calculation. The year-to-date total always reflects the cumulative amount up to today's date, regardless of the pay period selected in the report.
What is Qualified Overtime?
The One Big Beautiful Bill Act (OBBBA) is a US federal law that allows employees to deduct the premium portion of their federal overtime earnings from federal income taxes — up to $12,500 per year for individual filers and $25,000 per year for married couples filing jointly. The OBBBA applies to tax years 2026 through 2028.
Only the premium half (0.5x) of the 1.5x overtime multiplier qualifies — not the full overtime rate. For example, if an employee earns $20/hour and their overtime rate is $30/hour, only the $10 premium per overtime hour counts as Qualified OT.
Qualified Overtime only applies to federal overtime under the Fair Labor Standards Act (FLSA) — hours worked beyond 40 in a single workweek. The following do not count as Qualified OT:
- Daily overtime thresholds (for example, California daily OT)
- Double time
- Holiday or Sunday premiums that do not cross the 40-hour federal threshold
- Non-worked hours such as PTO, sick leave, or paid holidays
Worked hours & wages report
The Worked Hours & Wages (WH&W) report includes an optional checkbox to display Qualified OT columns. Checking this box adds two columns to the far right of the report without changing any existing columns.
- Go to Reporting in the left navigation.
- Select Worked Hours & Wages.
- Set your pay period and any other filters.
- Check the Include Qualified Overtime checkbox.
- Run the report.
Two columns appear on the far right of the report:
- Qualified OT — the qualifying overtime premium earned by each employee in the selected pay period.
- Qualified OT YTD — the cumulative qualifying overtime premium earned by each employee from January 1 up to today's date. Note: The year-to-date total always reflects the cumulative amount up to today's date, regardless of the pay period selected in the report.
Time clocking labor summary
Qualified OT data also appears in the Summary tab of the Time Clocking Labor Summary. The two columns can be shown or hidden depending on your preference.
- Go to Time Clocking in the left navigation.
- Select Pay Periods.
- Select the relevant pay period.
- Open the Labor Summary tab.
- Show or hide the Qualified OT and Qualified OT YTD columns using the column display controls.
Two columns appear in this view:
- Qualified OT — qualifying overtime premium for the selected pay period.
- Qualified OT YTD — cumulative qualifying overtime premium from January 1 up to today's date. Note: The year-to-date total always reflects the cumulative amount up to today's date, regardless of the pay period selected in the report.
Tip: Hover over the Qualified OT column header for an in-app explanation of what the figure represents and how it differs from total overtime pay.
Next steps
The Qualified OT figures in the Worked Hours & Wages report are intended to support W-2 reporting for the 2026 tax year. 7shifts provides the reporting data only — employers are responsible for verifying accuracy before applying these figures to W-2 forms. Employees are responsible for claiming the deduction when filing their federal income tax return.
Payroll export integrations (such as ADP Run, Paylocity, and Paychex) do not yet automatically include Qualified OT data. Admins must manually reference the WH&W report to cross-reference these figures with their payroll provider.
Note for 7shifts Payroll: At this time, Qualified OT figures do not automatically flow through to 7shifts Payroll. Automatic transfer of Qualified OT data to 7shifts Payroll is planned for a future update. For the 2025 tax year, Check Technologies automatically calculated Qualified OT estimates based on payroll data processed within 7shifts. More information here: One Big Beautiful Bill Act (OBBBA) tax reporting for 2025