Big Beautiful Tax Act and Overtime

[Rissa141618]

My employer is claiming that since the law was signed on July 4, 2025, only the overtime worked after that date would be considered, but what I'm reading online it's overtime starting January1st. Is that correct?

[rjs]

You are correct. Your employer is wrong.

The law (IRC §225) says the deduction is for "the qualified overtime compensation received during the taxable year."

[LindaS5247]

Yes, that is correct the "no tax on overtime" provision in the One Big Beautiful Bill is retroactive to January 01, 2025.  Eligible employees can deduct qualified overtime from their federal taxable income  for hours worked after that date.

Under this new provision, eligible workers can deduct up to $12,500 of overtime pay earned during the year (up to $25,000 for married couples filing a joint return). But if your income is more than a certain amount, the deduction is gradually phased out.

Click here for I Worked Overtime Every Week. Here’s What It Did to My Tax Bill.

Click here for No Tax on Overtime Explained: Qualified Overtime Deduction Rules for 2025.

Click here for Taxes 2025-2026: One Big Beautiful Bill Act Tax Law Changes and How That Impacts You.

 

If you have additional information or questions regarding this, please return to Community and we would be glad to help.