If you put in extra hours on the job, there's good news from President Trump's One Big Beautiful Bill Act, signed in July 2025 and you are going to be able to get a special deduction for 2025 taxes.
The "No Tax on Overtime" initiative means you won't pay federal income tax on part of your overtime earnings for tax years 2025 through 2028.
Here's how it works simply: Under federal law (Fair Labor Standards Act), if you're a non-exempt hourly worker (or certain salaried folks earning under about $35,000, $58,000 a year), you get "time-and-a-half" pay for hours over 40 a week. That means you earn your regular hourly rate plus an extra 50 percent premium. The tax break applies only to that premium portion (the "half"). For example, if you earn $20 an hour regular and work 10 overtime hours in a week: Overtime pay: 10 hours, $30 (1.5' rate) = $300 total.
But deductible amount: Just the premium, 10 hours, $10 extra = $100 tax-free from federal income tax.
You can deduct up to $12,500 per year ($25,000 if married filing jointly). It phases out if your total income exceeds $150,000 single ($300,000 joint). You'll still pay Social Security/Medicare taxes and any state taxes on it, and employers withhold as usual'but you get the money back when filing your return.
This helps millions of blue-collar folks like factory workers, nurses, truckers, and construction crews who rely on overtime. Estimates show average savings of $1,400, $2,000 a year for those who qualify and work regular OT.
It's temporary (ends 2028 unless extended), retroactive to January 2025, and can be claimed on your taxes (filed in 2026). Keep pay stubs to track it'talk to a tax pro or check IRS.gov for details.
