The OBBA has introduced a new deduction for overtime pay from tax year 2025. You may deduct up to $12,500 of qualified overtime premium on your Federal tax return (up to $25,000 for MFJ). The deducti...
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The OBBA has introduced a new deduction for overtime pay from tax year 2025. You may deduct up to $12,500 of qualified overtime premium on your Federal tax return (up to $25,000 for MFJ). The deduction is gradually phased out if your MAGI exceeds $150,000 ($300,000 for MFJ). The deduction is for the overtime premium, which is the portion over your regular pay.
For tax year 2025, your employer may list non-taxable overtime in box 14 with a specific label like "FLSA OT Prem". You might also receive a separate year-end statement giving you the amount. Otherwise, you have to calculate the overtime premium to enter on your tax return.
For tax year 2026 onwards, a specific Box 12 code will be used. This amount is an above-the-line deduction, meaning it will be subtracted from your gross income on form 1040.
In TurboTax Online, this is how you enter the qualified overtime premium:
After entering your form W-2, you'll see a screen titled Let's Check for Other Situations
Put a checkmark on Overtime and click Continue
Follow the TurboTax questionnaire to enter your qualified overtime premium
This deduction will transfer to Schedule 1-A of your form 1040, then to line 13b of your form 1040.