Only the overtime premium is deductible
The 2025 deduction applies to the extra, premium part of overtime — the amount over your regular rate — not the whole overtime paycheck. For time-and-a-half, that premium is the “half” in “time-and-a-half”: the regular rate times the multiplier minus one. For each overtime hour at $20 and a 1.5 multiplier, the premium is $20 × 0.5 = $10.
The yearly premium is 5 × 52 × 0.5 × $20 = $2,600. That is under the $12,500 single cap, so the full $2,600 is deductible. At a 22% marginal rate the estimated tax saving is about $572.
The caps and the phase-out
The deduction is capped at $12,500 for single filers and $25,000 for married filing jointly. Above $150,000 of income (single) or $300,000 (married), the cap drops by $100 for every $1,000 over the limit. Enter your income to apply the phase-out; leave it blank to see the uncapped premium against the base cap.
Who and when
This is an above-the-line deduction for tax years 2025 through 2028, available whether or not you itemize, for FLSA-required overtime earned by non-exempt workers. It reduces taxable income; it does not change the overtime pay itself.
This is a general estimate of a federal deduction, not tax advice or a filing. Confirm current limits and your eligibility with a tax professional or the IRS.