Under the One Big Beautiful Bill Act (OBBBA), the No Tax on Overtime benefit is a federal tax deduction you claim on your 2025 return. When you file, you're allowed to deduct the overtime premium (the extra "half" in your time-and-a-half pay), up to a cap of $12,500 if you're single or $25,000 if you're married filing jointly. There is also an income phaseout (this starts at $150,000 for single filers and $3000,000 for married filing jointly).
Here is an article you may find helpful: No Tax on Overtime Explained: Qualified Overtime Deduction Rules for 2025
