Tax year 2025 · federal · general information
Is there no tax on overtime now?
The deduction for overtime pay, for tax years through 2028.
What it is
- The Code allows a deduction for qualified overtime compensation. Overtime pay is still income; the deduction reduces how much of it is taxed.
- Only the extra part counts: the overtime pay above your regular rate, and only overtime that the Fair Labor Standards Act requires your employer to pay.
The limits
- There is a yearly cap, higher on a joint return, and it shrinks as your modified adjusted gross income rises above a threshold set in the statute.
- The overtime has to be reported on the statement your employer gives you, and your social security number has to be on your return.
- No deduction is allowed for tax years beginning after December 31, 2028.
What it turns on
- whether the overtime is required under the Fair Labor Standards Act
- how much of your overtime pay is above your regular rate
- your modified adjusted gross income
- whether the amount is reported on the statement your employer gives you
What would make it not apply
- you are married and do not file a joint return
- your social security number is not on the return
- the pay is a qualified tip rather than overtime
- the tax year begins after December 31, 2028
The law, quoted
Sources: IRC §225. Each passage below is copied from the document VALID fetched, with the start of its SHA-256 fingerprint.
(a) In general There shall be allowed as a deduction an amount equal to the qualified overtime compensation received during the taxable year and included on statements furnished to the individual pursuant to section 6041(d)(4) or 6051(a)(19).
IRC §225 — (a) In general · law in effect September 29, 2026 · fingerprint a40280c343f7
(1) In general For purposes of this section, the term "qualified overtime compensation" means overtime compensation paid to an individual required under section 7 of the Fair Labor Standards Act of 1938 that is in excess of the regular rate (as used in such section) at which such individual is employed.
IRC §225 — (1) In general · law in effect September 29, 2026 · fingerprint a40280c343f7
References in Text Section 7 of the Fair Labor Standards Act of 1938, referred to in subsec. (c)(1), is classified to section 207 of Title 29 , Labor.
IRC §225 — References in Text · law in effect September 29, 2026 · fingerprint a40280c343f7
Next step
Check that your overtime premium is reported on your year-end pay statement, then confirm the limit that applies at your income with a licensed professional.
This page explains how the rule works in general. Whether it applies to you depends on your own facts, so put your situation to a licensed CPA, enrolled agent, or tax attorney before you act on it.