President Donald Trump’s signature One Big Beautiful Bill Act (OBBBA) includes a provision that allows employees who work more than 40 hours per week to deduct a portion of their overtime pay from their taxable income.
The 1938 Fair Labor Standards Act (FLSA) guarantees pay of at least 1.5 times a worker’s regular wages for every hour worked over 40 in a given seven-day period. Traditionally, time-and-a-half pay has been subject to federal income taxes, including those that fund Medicare and Social Security. However, from 2025 through 2028, eligible taxpayers can deduct up to $12,500 in overtime pay, or $25,000 for joint filers, without itemizing, provided they earn less than $150,000, at which point the deduction begins to phase out.
