Overtime and making over 150K

[kaesmom64]

Is the no tax on overtime prorated? If you are single and make over 150K will there be any tax advantages?

[DRich5]

 Effective for 2025 through 2028, individuals who receive qualified overtime compensation 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 the Fair Labor Standards Act (FLSA) and reported on a Form W-2, Form 1099, or other specified statement furnished to the individual.

• Maximum annual deduction is $12,500 ($25,000 for joint filers).
• Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).

The deduction phases out $100 for every $1,000 above the income level.  For example, if you make $155,000, you deduction would decrease $500.  

[Tax Hero Niki]

Yes, the "no tax on overtime" under the One Big Beautiful Bill is pro-rated. It is a deduction to income, and the deduction phases out at modified adjusted gross income of $150,000 ($300,000 for joint filers). You can deduct up to $12,500 ($25,000 for joint filers) of qualified overtime compensation.

• Max deduction: $12,500 ($25k for joint filers)
• Max income: $275,000 ($550k for joint filers)
• Phase out begins at income greater than: $150,000 ($300,000 for joint filers)
  • This means that only filers with income less than $150k/$300k can get the full $12.5k deduction. For every $1,000 of income greater than $150k/$300k, the maximum deduction is reduced by $100.

Qualified Overtime Compensation
Only the extra half-time premium paid is deductible. In other words, if your hourly rate is $20p/h, and your overtime rate is $30p/h, then only the $10p/h premium is deductible.

Important Notes

• Effective years 2025 - 2028
• This deduction only applies to federal income tax
• The deduction does not apply to FICA (Social Security and Medicare taxes)
• State and local jurisdictions may have separate treatment