New Overtime Pay Deduction Available Through 2028: Up to $25,000 for Qualifying Taxpayers

Taxpayers should be aware of a new overtime pay deduction effective 2025 through 2028. Individuals who receive qualified overtime compensation may deduct the pay that exceeds their regular rate of pay (regardless of whether they are itemizing or non-itemizing). The deduction is up to $12,500 for single filers and $25,000 for joint filers, but phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).

Employers and other payors are required to file information returns with the IRS (or SSA) and furnish statements to taxpayers showing the total amount of qualified overtime compensation paid during the year.

For more information on this and for eligibility/reporting details, the IRS has guidance posted here.

If you have any questions about this law change, contact Kim Allen at (617) 451-0303 x106