diff --git a/Source/qol/itemlabels.cpp b/Source/qol/itemlabels.cpp
index c6f4d4dbc..7a485129e 100644
--- a/Source/qol/itemlabels.cpp
+++ b/Source/qol/itemlabels.cpp
@@ -38,11 +38,16 @@ bool highlightKeyPressed = false;
 bool isLabelHighlighted = false;
 std::array<std::optional<int>, ITEMTYPES> labelCenterOffsets;
 
-const int BorderX = 4;               // minimal horizontal space between labels
-const int BorderY = 2;               // minimal vertical space between labels
-const int MarginX = 2;               // horizontal margins between text and edges of the label
-const int MarginY = 1;               // vertical margins between text and edges of the label
-const int Height = 11 + MarginY * 2; // going above 13 scatters labels of items that are next to each other
+const int BorderX = 4; // minimal horizontal space between labels
+const int BorderY = 2; // minimal vertical space between labels
+const int MarginX = 2; // horizontal margins between text and edges of the label
+
+// Vertical space between the text and the edges of the label.
+int TextMarginTop() { return IsSmallFontTall() ? 1 : -1; }
+int TextMarginBottom() { return IsSmallFontTall() ? 1 : 3; }
+
+// The total height of the label box.
+int LabelHeight() { return (IsSmallFontTall() ? 16 : 11) + TextMarginBottom() + TextMarginTop(); }
 
 /**
  * @brief The set of used X coordinates for a certain Y coordinate.
@@ -123,7 +128,7 @@ void AddItemToLabelQueue(int id, Point position)
 		position *= 2;
 	}
 	position.x -= nameWidth / 2;
-	position.y -= Height;
+	position.y -= LabelHeight();
 	labelQueue.push_back(ItemLabel { id, nameWidth, position, std::move(textOnGround) });
 }
 
@@ -146,6 +151,8 @@ void DrawItemNameLabels(const Surface &out)
 	if (labelQueue.empty())
 		return;
 	UsedX usedX;
+	const int labelHeight = LabelHeight();
+	const int labelMarginTop = TextMarginTop();
 
 	for (unsigned i = 0; i < labelQueue.size(); ++i) {
 		usedX.clear();
@@ -156,7 +163,7 @@ void DrawItemNameLabels(const Surface &out)
 			for (unsigned j = 0; j < i; ++j) {
 				ItemLabel &a = labelQueue[i];
 				ItemLabel &b = labelQueue[j];
-				if (std::abs(b.pos.y - a.pos.y) < Height + BorderY) {
+				if (std::abs(b.pos.y - a.pos.y) < labelHeight + BorderY) {
 					const int widthA = a.width + BorderX + MarginX * 2;
 					const int widthB = b.width + BorderX + MarginX * 2;
 					int newpos = b.pos.x;
@@ -181,7 +188,8 @@ void DrawItemNameLabels(const Surface &out)
 	for (const ItemLabel &label : labelQueue) {
 		Item &item = Items[label.id];
 
-		if (MousePosition.x >= label.pos.x && MousePosition.x < label.pos.x + label.width && MousePosition.y >= label.pos.y + MarginY && MousePosition.y < label.pos.y + MarginY + Height) {
+		if (MousePosition.x >= label.pos.x && MousePosition.x < label.pos.x + label.width
+		    && MousePosition.y >= label.pos.y && MousePosition.y < label.pos.y + labelHeight) {
 			if (!gmenu_is_active()
 			    && PauseMode == 0
 			    && !MyPlayerIsDead
@@ -194,10 +202,10 @@ void DrawItemNameLabels(const Surface &out)
 			}
 		}
 		if (pcursitem == label.id && stextflag == TalkID::None)
-			FillRect(clippedOut, label.pos.x, label.pos.y + MarginY, label.width, Height, PAL8_BLUE + 6);
+			FillRect(clippedOut, label.pos.x, label.pos.y, label.width, labelHeight, PAL8_BLUE + 6);
 		else
-			DrawHalfTransparentRectTo(clippedOut, label.pos.x, label.pos.y + MarginY, label.width, Height);
-		DrawString(clippedOut, label.text, { { label.pos.x + MarginX, label.pos.y }, { label.width, Height } },
+			DrawHalfTransparentRectTo(clippedOut, label.pos.x, label.pos.y, label.width, labelHeight);
+		DrawString(clippedOut, label.text, { { label.pos.x + MarginX, label.pos.y + labelMarginTop }, { label.width, labelHeight } },
 		    { .flags = item.getTextColor() });
 	}
 	labelQueue.clear();