Overview of the deduction
- Effective 2025 through 2028, individuals may deduct the portion of qualified overtime pay that exceeds their regular rate of pay (for example, the “half” portion of “time-and-a-half”).
- Overtime must be reported on Form W-2, Form 1099, another statement furnished to the individual, or directly by the individual.
- Maximum annual deduction is $12,500 ($25,000 for joint filers).
- Phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).
Who qualifies
Taxpayer who:
- Have a Social Security number (SSN)
- Claim itemized or non-itemized deductions
How to claim the deduction
- Include your Social Security number on the return.
- File jointly if you’re married.
Reporting requirements
- Employers and other payors must report qualified overtime compensation on IRS (or SSA) information returns.
- Treasury and the IRS will provide transition relief for tax year 2025.
