Series Episode 08 | One Big Beautiful Bill
Big opportunity for overtime workers: Take a tax break on extra hours!
Under the One Big Beautiful Bill Act, signed on July 4, 2025, qualified overtime pay earns a federal tax deduction of up to $12,500 for individuals or $25,000 for joint returns, available for tax years 2025 through 2028.
This applies only to the premium pay portion, the amount above your regular hourly rate required by the Fair Labor Standards Act. For example, if your base rate is $20 and overtime pay is $30, that extra $10 per hour qualifies.
Even if you earn $10,000 in overtime, you can only deduct $9,000 if you’re single due to the 10% phase-out starting at $150,000 income ($300,000 joint). However, if you’re married filing jointly, up to $25,000 remains deductible.
What it means for you: If you work overtime regularly, from hourly jobs to side gigs, you could lower your taxable income significantly. But it’s essential to understand the rules and limitations.
Want to ensure you’re maximizing this benefit while staying compliant with IRS requirements?
Schedule a consultation with Leader CPA, your strategic partner in applying the new rules correctly.
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