No Tax On Overtime

I'm sure you've heard about the "No Tax on Overtime" deduction established under the One Big Beautiful Bill Act. If you earn overtime pay, this has probably piqued your interest and you're wondering exactly how it benefits you. So, here are the basics:

• When you file your tax return, you can deduct up to $12,500 for single filers, or $25,000 for joint filers for overtime wages paid in a year.

• Overtime wages are the wages paid at a rate above your regular rate of pay for overtime hours.

• It is your employers responsibility to report overtime wages.

• Overtime wages are still subject to payroll taxes and state tax.

• The deduction phases out at $100 for every $1,000 of Modified Adjusted Gross Income (MAGI) above $150,000 for single filers or $300,000 for joint filers.

  
  

  • For example, as a single filer you have MAGI of $160,000 and earn $15,000 in qualified overtime pay, then your phaseout is $1,000 and your deduction is reduced from $12,500 to $11,500.

• The deduction is available for tax years 2025 through 2028.