Explaining IRS Overtime Tax Laws
Summary
A new law signed by President Donald Trump in July 2025 changes how overtime pay is taxed for federal income tax. The law introduces a specific deduction called No Tax on Overtime, which allows some workers to lower their taxable income based on qualified overtime pay. However, not all overtime pay is tax-free, and certain conditions must be met to benefit.Key Facts
- The No Tax on Overtime deduction lets workers reduce taxable income from overtime pay.
- This applies only to the extra amount earned over the regular pay rate.
- Workers must report overtime on standard forms like W-2 or 1099.
- The deduction is claimed during tax filing and doesn’t change the paycheck.
- The law phases out the deduction for single filers earning over $150,000 and joint filers over $300,000 in modified adjusted gross income (MAGI).
- Salary earners making less than $684 per week can qualify for the deduction.
- Payroll taxes, such as those for Social Security and Medicare, still apply to overtime pay.
- Tips earned during overtime are not included in this deduction, but may qualify under a separate provision.
Read the Full Article
This is a fact-based summary from The Actual News. Click below to read the complete story directly from the original source.
