There is both state and federal overtime tax in 2025. However, the No Tax on Overtime provision of the 2025 Tax Act (One Big Beautiful Bill Act) allows eligible taxpayers to deduct a portion of their overtime pay from their taxable income temporarily, from 2025 through 2028.

Although the bill was signed into law in July, the No Tax on Overtime provision is retroactive to Jan. 1, 2025, and is active through 2028. Single filers can claim up to $12,500 and taxpayers filing jointly can claim up to $25,000 for qualified overtime compensation. The deduction starts phasing out for single taxpayers who have modified adjusted gross income of more than $150,000, and taxpayers filing jointly with more than $300,000.

To claim the deduction, taxpayers must include a valid Social Security number (SSN) on their return. Additionally, married individuals must file jointly to be eligible for the deduction.

The deduction is available to non-itemizers, meaning it can be claimed in addition to the standard deduction.

Have questions about the No Tax on Overtime provision? Wondering how much overtime pay you could deduct in 2025? Our local Tax Pros are here all year and ready to talk taxes. Book your appointment today.

Sharon Brucker, CPA Senior Tax Research Analyst Published on: August 06, 2025
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*This content is for general informational purposes only. It is not intended to be comprehensive and should not be construed as professional tax or financial advice for any specific individual tax situation. Taxpayers should always consult a qualified professional for individual guidance. This information constitutes a solicitation under the Treasury Department's Circular 230. Most offices are independently owned and operated.