You may have heard about this on the news or from a friend that no tax on overtime pay is coming.
It’s a provision included in the tax overhaul bill signed by President Trump earlier this year. Maribel Aber, a correspondent for CNN’s Money Matters, breaks down everything you need to know so that you’ll have the full picture.
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First, only earnings above your standard hourly wage will be tax-free, according to Aber. Meaning, if you earn “time-and-a-half” for overtime, only that “half” is tax-free.
That can make a big difference.
Single filers can deduct up to $12,500 of eligible overtime, and married workers up to $25,000.
This provision, which runs through 2028, applies to single filers earning up to $150,000 a year.
For married couples, it’s up to $300,000 before it starts to phase out. You won’t have to itemize to take the deduction.
But overtime is still subject to Social Security and Medicare taxes.
Plus, state and local, depending on where you live.
Bottom line: keep your pay stubs and checks.