Overtime Deduction on Wages

No, the new overtime deduction is not available on all overtime wages. There are specific requirements and limitations that apply.

Qualified Overtime Compensation:

The deduction only applies to qualified overtime compensation, which means overtime compensation paid to an Individual that is required under section 7 of the Fair Labor Standards Act of 1938 and is in excess of the regular rate at which the individual is employed [2].

Key Limitations:

The deduction is limited to $12,500 per year ($25,000 for married filing jointly) [3]. Additionally, the deduction begins to phase out when modified adjusted gross income exceeds $150,000 ($300,000 for married filing jointly) [4].

Exclusions:

Qualified overtime compensation does not include any qualified tip income that is eligible for the separate deduction for qualified tips [2].

This provision is effective for tax years beginning after 2024 and before 2029 [1].