“No tax on overtime” is a deduction for the extra half of time-and-a-half required by the Fair Labor Standards Act. It is not an exclusion of the whole overtime check, and it does not touch Social Security or Medicare. It runs from 2025 through 2028.
Premium = overtime hours × regular rate × 0.5. Deduction = that premium, capped, then reduced as MAGI rises.
Social Security and Medicare still apply. This deduction does not reduce them, and the payroll line ignores the wage base.
| FLSA overtime premium | $3,000.00 |
|---|---|
| Deduction after cap and phase-out | $3,000.00 |
| Estimated federal income tax saved | $660.00 |
| Employee payroll tax still due | $688.50 |
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Qualified overtime is the extra half in time-and-a-half, not the whole overtime check. Ten hours at $30 is $450 of overtime pay and $150 of qualified premium. If a statement shows $15,000 of total time-and-a-half pay, the premium is $15,000 ÷ 3 = $5,000. Double time does not add a second qualified half.
The deduction is capped at $12,500, or $25,000 on a joint return, for 2025 through 2028. It then drops by $100 for each full $1,000 of modified AGI over $150,000, or over $300,000 on a joint return. Married people who file separately get nothing. A Social Security number is required.
The deduction lowers taxable income. It does not lower Social Security or Medicare. Tax saved is estimated with 2026 brackets and the 2026 standard deduction, treating modified AGI as the income before this deduction and with no other adjustments.
| Premium | $3,000.00 |
|---|---|
| Deduction | $3,000.00 |
| Estimated tax saved | $660.00 |
| Premium ($15,000 ÷ 3) | $5,000.00 |
|---|---|
| Deduction | $5,000.00 |
No. Only the FLSA premium, generally the extra half of time-and-a-half, qualifies. The straight-time portion of those hours stays taxable. A contractual double-time bonus above the FLSA half does not qualify either.
The cap is $12,500 per return, or $25,000 if you file jointly. It shrinks by $100 for each full $1,000 of modified AGI over $150,000, or over $300,000 joint. At $275,000 single or $550,000 joint the cap is fully gone. Married filing separately is not eligible.
No. Qualified overtime is still wages for Social Security and Medicare. The new law is an income-tax deduction on your return, claimed for tax years 2025 through 2028. It expires after 2028.