Tax Tip #262

For years 2025 through 2028, there is a new deduction for qualified overtime pay — hours worked beyond 40 hours a week. Single filers can deduct up to $12,500, and for those married filing jointly (MFJ), $25,000 can be deducted. The deduction phases out starting at an AGI of $150,000 for single filers and $300,000 for MFJ filers. 

Examples: 

• Alexis, single, received $9,000 of overtime in 2025 and has an AGI of $123,915. The full $9,000 is exempt from income tax. 

• Lexi, single, received $19,000 of overtime in 2025 and has an AGI of $102,999. Only $12,500 is exempt from income tax. 

• Gloria, MFJ, received $20,000 of overtime in 2025 and has an AGI of $346,000. None of the overtime is exempt from income tax.

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