Does “no tax on overtime” mean all of my overtime pay is deductible?
No. The federal deduction applies to qualified overtime compensation above the regular rate that is required under section 7 of the Fair Labor Standards Act. If the regular rate is $20 an hour and required overtime is $30, the potentially deductible amount is generally the extra $10, not the full $30.
For 2025 through 2028, the annual cap is $12,500, or $25,000 on a joint return, subject to income-based phaseouts. Married taxpayers must file jointly. Qualified overtime generally remains subject to Social Security and Medicare taxes.
