Is overtime pay completely tax-free under the OBBBA?

No — and this is the most common misconception. The OBBBA created a deduction for the premium portion of FLSA-required overtime, up to $12,500 per return ($25,000 married filing jointly). Only the "half" in time-and-a-half qualifies, not the entire overtime paycheck. Social Security and Medicare taxes still apply to all overtime pay. Some states also don't conform to the federal rule, so state income tax may still apply.

How do I calculate my qualified overtime compensation?

Per IRS Notice 2025-69, for workers paid time-and-a-half: divide your total overtime pay by 3. That gives you the premium portion. For example, if you earned $9,000 in overtime pay at time-and-a-half, your qualified overtime compensation is $9,000 ÷ 3 = $3,000. For double-time workers, divide by 4. Alternatively, calculate as: (overtime rate − regular rate) × overtime hours worked.

What is the income limit for the no tax on overtime deduction?

The full deduction is available if your modified adjusted gross income (MAGI) is below $150,000 for single filers, or $300,000 for married couples filing jointly. The deduction phases out for income above those thresholds. For most hourly workers — who typically earn $30,000–$80,000 — this limit isn't a concern.

Where do I claim the overtime deduction on my tax return?

On your 2025 federal return (filed in 2026), claim the deduction on Schedule 1-A (Form 1040) — the new form created specifically for OBBBA deductions. Part III of Schedule 1-A covers qualified overtime compensation. The total from Schedule 1-A flows to Form 1040 line 13b. For 2026 tax year, your W-2 will have the overtime amount in Box 12 Code TT, making the calculation easier.

Does the no-tax-on-overtime deduction apply to salaried employees?

Generally no. The deduction applies to overtime required under Section 7 of the Fair Labor Standards Act (FLSA). Most salaried employees earning over the FLSA exempt threshold ($684/week or $35,568/year in 2025) are exempt from FLSA overtime requirements — meaning their extra hours aren't FLSA-required overtime even if their employer pays them extra. Salaried non-exempt workers who do receive FLSA-required overtime do qualify.

Can I update my W-4 to stop over-withholding on overtime?

Yes. The 2026 Form W-4 has a dedicated "Qualified overtime compensation" line in the Deductions Worksheet (Page 4). Enter your estimated qualified overtime (the premium portion only, up to $12,500 for single filers). After completing the full worksheet, transfer the total to Step 4(b) on Page 1 and submit to your employer. This tells payroll to reduce withholding to account for the deduction going forward.

Walang Buwis sa Overtime Pay 2026: Ano ang Ibig Sabihin Para sa Iyong Sweldo

Ang OBBBA ay lumikha ng deduction para sa premium na bahagi ng FLSA overtime — hanggang $12,500 para sa single filers, $25,000 para sa mag-asawa. Narito ang eksaktong kwalipikasyon at kung paano i-update ang iyong W-4.

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⚡ Mabilis na Buod

Ang OBBBA ay lumikha ng deduction para sa premium na bahagi ng FLSA overtime — hindi ang buong overtime pay
Para sa time-and-a-half: qualified OT = kabuuang overtime pay divided by 3
Maximum deduction: $12,500/taon para sa single; $25,000 para sa married filing jointly
Ang FICA taxes ay nananatiling naaangkop sa lahat ng overtime
I-update ang 2026 W-4 Deductions Worksheet para huminto sa sobrang withholding

Ang OBBBA ay hindi nagpapalaya sa lahat ng overtime mula sa buwis. Nilikha nito ang isang federal income tax deduction para sa premium na bahagi ng FLSA-required overtime.

Ang Premium Calculation

Kung kumikita ka ng $20/oras at nagtatrabaho ng 10 oras ng overtime, nagbabayad ang iyong employer ng $30/oras — $200 regular + $100 premium. Ang $100 premium lamang ang kwalipikado para sa deduction, hindi ang buong $300.

Ayon sa IRS Notice 2025-69, para sa time-and-a-half: kabuuang overtime pay ÷ 3 = qualified overtime

Magkano pa ang Matatanggap

Manggagawa sa warehouse na $20.50/oras, 8 oras OT/linggo (48 linggo): kabuuang OT pay $11,808 → qualified OT $3,936 → tax savings sa 22%: $866/taon (+$33 bawat biweekly pagkatapos i-update ang W-4).

Paano I-update ang W-4

Ang W-4 2026 ay may dedicated na linyang "Qualified overtime compensation" sa Deductions Worksheet (Page 4). Ilagay ang iyong tinatanyang qualified overtime (kabuuang OT pay ÷ 3, hanggang $12,500). Kumpletuhin ang worksheet, ilipat ang kabuuan sa Step 4(b), at isumite sa HR.

Nananatiling May FICA Taxes

Ang Social Security (6.2%) at Medicare (1.45%) ay patuloy na naaangkop sa lahat ng overtime pay. Sa $10,000 na overtime pay, magbabayad ka pa rin ng $765 sa FICA taxes.

Sino ang Karapat-dapat

Karapat-dapat: Mga non-exempt hourly workers na ang overtime ay kinakailangan ng FLSA Section 7; valid SSN (hindi ITIN); MAGI na wala pang $150,000 (single) / $300,000 (married); ang mga kasal ay dapat mag-file ng jointly.

Hindi karapat-dapat: Mga FLSA-exempt na salaried employees; self-employed; ITIN holders; voluntary overtime bonuses na hindi FLSA-required.

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