The tax law is clear when it comes to deductions of almost any kind. Generally, if you are not paying tax on the income associated with a possible deduction, you cannot use that deduction to reduce income from other sources.
If the overtime portion of the income from the exempt activity is not part of your taxable income, unless they update or change the deduction rules, which would not be unheard of, there will be no overtime deduction for that specific tax exempt income job.
The overtime description is as follows under the One Big Beautiful Bill Act (OBBBA): 'For tax years 2025 through 2028, individuals who receive qualified overtime compensation may deduct the pay that exceeds their regular rate of pay (generally, the “half” portion of “time-and-a-half” compensation) that is required by the Fair Labor Standards Act and reported on a Form W-2, Form 1099, or other specified statement furnished to the individual.' (Tips Received in 2025)
Your employer must meet specific Fair Labor Standards Act (FLSA) requirements to qualify. If your employer doesn't meet these qualifications, then you do not have qualifying overtime.
When the Fair Labor Standards Act was enacted in 1938, it provided an exemption from the overtime requirements for bona fide executive, administrative, and professional employees. It is possible that your employer pays this employee benefit but is not required to make the payment under the FSLA.
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