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See who qualifies, how it works, income limits, and key start dates. The federal overtime tax policy is part of a tax reform package, including no tax on tips and no tax on social security benefits The house passed a budget resolution in february 2025, but the overtime tax plan bill awaits senate approval. Starting in 2025, a large chunk of overtime pay will not be subject to federal income tax
The “no tax on overtime” provision is a new federal income tax deduction introduced by the one big beautiful bill act, signed into law on july 4, 2025 It allows eligible workers to deduct the premium portion of their overtime pay from their federal taxable income, helping reduce their overall tax bill. How does no tax on overtime work Under the new law, workers can deduct up to $12,500 in overtime pay and $25,000 in reported tips from their taxable income on federal tax returns.
Here we outline the key no tax on overtime bill details, so you can understand how and if you’re eligible. New no tax on overtime deduction starting in 2025 through 2028, individuals who earn qualified overtime compensation can deduct the portion of their pay that exceeds their standard rate How does the “no tax on overtime” law work Have questions about no tax on overtime
Here's everything you need to know about the no tax on overtime bill and how it impacts employers and employees. Here’s a clear breakdown of what this new deduction means, how much you can claim, and who qualifies.
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