As per the One Big Beautiful Bill, effective for Tax Years 2025 through 2028, individuals who receive overtime pay, may deduct the pay that exceeds their regular rate of pay - such as the "half" portion of "time-and-a-half" compensation - that is required by Fair Labor Standards Act (FLSA) and that is reported on your tax form, like, W-2.
- Maximum annual deduction is $12,500 ($25,000 for joint filers).
- file jointly if married, to claim the deduction.
- Deduction phases out for taxpayers with Modified AGI over $150,000 ($300,000 for joint filers).
Employer will be required to file information returns with the IRS (or SSA) and furnish statements to taxpayers showing the amount of qualified overtime pay that is paid during the year.
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