I am writing this in August of 2025, and over the past several months, we’ve heard various comments about potential changes to tax policies, which allegedly would benefit workers, especially those paid by the hour. Here’s an update for what you need to know about the “No Overtime Tax” bill as it stands today:

“NO TAX ON OVERTIME”

• The deduction applies only to required overtime compensation, mandated by the FLSA. 

• It also only covers the amount in “excess” of the employee’s “regular rate.” 

• The deduction does not apply to overtime premiums beyond what the FLSA requires.

  • Those state laws (e.g., California law) that require OT pay based on the number of hours worked over eight in one day, or OT being paid for working 7 days in-a-row. Those should not be claimed under this regulation. 

• The deduction for this exemption is capped at $12,500 ($25K if filing jointly) in the tax year. The amount is reduced by $100 for each $1,000 by which the taxpayer’s gross income exceeds $150,000 ($300K if it’s a joint filing).

Just as we noted for you about “qualified tip income,” (see “No Tax on Tips” advice paper, under ‘Resources’)  the overtime deduction is only allowed when the taxpayer files with their social security number (if married and filing jointly, the spouse’s social security number, too) on their tax return.

This information is provided for general knowledge only. It does not establish the provision of legal advice, tax advice, accounting services, or investment advice of any kind nor should it be taken as such.