Hey everyone,
Just wanted to share some quick info on the new “no tax on overtime” policy from the One Big Beautiful Bill. Here’s the rundown:
- Start Date: The policy is effective for the 2025 tax year, meaning it applies to overtime pay earned starting January 1, 2025.
- Retroactive Pay: Yes, the deduction is retroactive for all qualified overtime pay earned in 2025. You can deduct up to $12,500 ($25,000 for married filing jointly) from your taxable income, but it phases out for incomes above $150,000 ($300,000 for joint filers).
- Details: This is an above-the-line deduction, so it applies whether you itemize or take the standard deduction. Employers will need to report total overtime compensation, and there’s a transition rule to ease first-year reporting. Note: this doesn’t affect FICA taxes and expires end of 2028.
No immediate paycheck changes, but expect a bigger refund when filing 2025 taxes if you earn overtime! Anyone planning to take advantage of this?
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