Overtime Pay Tax Deduction for 2025: Are You Eligible?

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For the 2025 tax year, qualifying workers may deduct the premium portion of overtime pay, lowering their taxable income.

What Counts as Overtime?

Only the overtime premium qualifies — the extra pay earned above your regular hourly rate. Regular wages are not deductible.

Who Can Claim It?

You may qualify if:

• You earned overtime pay in 2025

• Overtime was paid under federal or state labor laws

• You meet income eligibility limits

How to Claim the Deduction

• Calculated on Schedule 1‑A

• Transferred to Form 1040

• Claimed even if you take the standard deduction

Documentation You’ll Need

Because 2025 W‑2s do not separately list overtime:

• Detailed pay stubs

• Employer payroll summaries

• Overtime hour records

IRS Forms & Resources

• Form 1040

• Schedule 1‑A

• https://www.irs.gov/newsroom/treasury-irs-provide-guidance-for-individuals-who-received-tips-or-overtime-during-tax-year-2025

• https://www.irs.gov/pub/irs-drop/n-25-69.pdf

Important Limits

• Maximum annual deduction is $12,500 ($25,000 for joint filers)

• Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).

• Only federally defined overtime qualifies

If overtime made up a meaningful part of your income in 2025, this deduction could make a noticeable difference.