Understanding the New Overtime Pay Deduction for Tax Years 2025 to 2028
- latonya jeffries
- Dec 5, 2025
- 4 min read
Overtime pay often means extra income, but it also usually means higher taxes. Starting in 2025, a new federal tax deduction changes that for many workers. The Big Beautiful Bill Act, passed on July 4, 2025, introduces a temporary deduction that allows eligible taxpayers to exclude a portion of their qualified overtime pay from taxable income. This deduction applies through tax year 2028 and aims to ease the tax burden on workers who earn extra through overtime.
