Beginning in 2025, eligible workers can deduct up to $12,500 of qualified overtime pay (or $25,000 if married filing jointly). This deduction reduces taxable income, not AGI.
What is “qualified” overtime?
- Only the premium portion of federally required overtime (the “half” in time-and-a-half)
- Must be overtime under FLSA rules
- Overtime that employers choose to pay outside legal requirements does not qualify
Income limits
Deduction decreases by $100 for every $1,000 of MAGI over:
- $150,000 (single)
- $300,000 (joint filers)
Documentation matters
For 2025, employers are not required to show qualified overtime on the W-2. You will need to provide:
- Your final paystub
- Any employer overtime statements
- Complete W-2
Bottom line
This deduction can meaningfully reduce taxable income, but the rules are specific—and your documentation is key.