If you work overtime, there’s some good news this year. A recent tax law change introduced a new federal tax deduction for overtime income, which may help lower your tax bill if you regularly work extra hours.
Here’s what it means, who it helps, and what to keep in mind…
What Is the New Overtime Deduction?
Eligible workers may now deduct up to $12,500 of overtime income from their federal taxable income, if single, or up to $25,000 for married couples who file jointly.
The good news is that this deduction is in addition to the standard deduction.
You may qualify for this deduction if:
- You earn overtime pay as part of your job
- That overtime is reported through your employer
- Your total income is within the limits
Income Limits
- The full deduction is available up to $150,000 of income for single filers
- Up to $300,000 for married couples filing jointly
Once income goes above those amounts, the deduction begins to phase out. Some people may still receive a partial benefit, depending on their total income.
If your pay varies or includes different types of compensation, it’s important to look at the details to understand if this deduction is applicable to you.
How Long Does This Deduction Last?
This overtime deduction is temporary. It applies for a limited number of tax years under current law and could change or expire in the future. It’s helpful now but it’s not guaranteed long-term.
What This Deduction Does Not Do
- It does not eliminate payroll taxes
- It does not apply to self-employed or 1099 income
- It does not mean overtime pay isn’t reported
Overtime income is still earned, reported, and documented. This deduction simply changes how much federal income tax may apply.
Questions? We’re Here to Help.
Tax law changes can be confusing, especially when your income isn’t the same every week. If you’re unsure whether your overtime qualifies, how much you can deduct, or how this affects your overall tax picture, feel free to reach out to us at
☎ (818) 845-1964
✉ Or contact us through email or on our website with your questions - we’re happy to help
We’re here to help you make sense of the tax changes and feel confident about your return.
Disclaimer:
This information is intended for general educational purposes only and does not constitute tax, legal, or financial advice. Tax laws can change, and how they apply depends on your individual situation. Please contact Moore Paquette or a qualified tax professional for guidance specific to your circumstances.