Overtime Just Got a Little Sweeter — Here’s How to Keep More of It.

Let’s be honest — overtime can feel like a love-hate relationship. You love the bigger paycheck, but hate the bigger tax bill that follows. Good news: thanks to the One Big Beautiful Bill Act (yes, that’s really what they called it), Uncle Sam is finally giving your overtime a bit of a tax break.

What’s New?

From 2025 through 2028, you can deduct up to $12,500 of qualified overtime income each year — or $25,000 if you’re married and file jointly . That’s a fancy way of saying: some of that extra cash you earn for working nights and weekends gets to stick around instead of disappearing into the tax void.

And here’s the best part — you can claim this deduction whether you itemize or take the standard deduction. It’s like a bonus layer of tax savings, no matter how you file.

But It’s Not Totally Tax-Free

Before you start celebrating with a shopping spree, remember: this is a deduction, not a magic wand. Your overtime pay still gets hit with payroll taxes (Social Security and Medicare) and could still be fully taxable at the state level .

Think of it as a discount, not a freebie — but hey, a discount from the IRS is still worth smiling about.

Who Qualifies?

If you’re earning overtime that’s covered under the Fair Labor Standards Act (that’s the federal law that makes “time-and-a-half” a thing), you probably qualify. Your employer should report your qualified overtime on your W-2, making it easy to claim the deduction .

One catch: if you’re an owner of a corporation and pay yourself, you can’t game the system by “paying yourself overtime” — sorry, entrepreneurs .

High Earners, Heads Up

This deduction starts to phase out when your MAGI (Modified Adjusted Gross Income) goes over $150,000 (or $300,000 for joint filers) . But the thresholds are high enough that most overtime earners won’t hit them.

Bottom Line

If you’re clocking in extra hours, this new rule could put real money back in your pocket. And when you combine this with smart tax planning (hello, estimated payments and extensions), you can keep tax season from being a headache altogether.