What is Qualified overtime deduction?
In short
For 2025 through 2028, individuals can deduct up to $12,500 ($25,000 on a joint return) of qualified overtime compensation: the premium part of overtime pay required by federal labor law, such as the extra half in time-and-a-half.
Key takeaways
- The deduction phases out above $150,000 of modified adjusted gross income ($300,000 joint).
- It is available whether or not the taxpayer itemizes, but doesn't reduce adjusted gross income.
- The regular rate of pay for overtime hours isn't part of the deduction.
Where it's tested
REG: Individual Taxation: Adjustments & Deductions — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Under the One Big Beautiful Bill Act, what is the state and local tax (SALT) deduction cap, and is it permanent?