Under the One Big Beautiful Bill, the married filing jointly would still be the best option for your scenario, based on the information provided, to maximize the overtime deduction benefits.
How the Overtime Deduction Works:
- Married Filing Jointly: You can deduct up to $25,000 of qualified overtime pay. The deduction begins to phase out when your combined modified adjusted gross income (MAGI) exceeds $300,000.
- Single: As a single filer, you could only deduct up to $12,500 of qualified overtime pay, and the deduction would begin to phase out at a MAGI of $150,000.
In your specific situation, your combined income would be $235,000 ($160k + $75k). Filing jointly keeps you well below the $300,000 MAGI phase-out threshold, allowing you to claim the full $25,000 deduction. If you were to file as single, the higher-earning spouse's income of $160,000 would put them immediately into the phase-out range for the deduction, significantly reducing or eliminating their benefit.
Also worth noting:
- MAGI Phase-Out: The deduction is reduced by $100 for every $1,000 your MAGI exceeds the threshold.
- Qualified Overtime: The deduction applies specifically to the premium portion of overtime pay (the "half" in "time-and-a-half").
- Filing Status Requirement: To claim the full overtime deduction, married couples must file a joint return, hence the deduction is not allowed for the married filing separate status.
For more detailed information see:
Please feel free to reach out with any additional questions
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