This article is for information only and is not tax advice.
This article explains what qualified overtime compensation is, which payments don't qualify, and how much you can deduct. It's for anyone who answers the qualified overtime question in Sprintax Returns.
What qualified overtime compensation is
Qualified overtime compensation is overtime pay that exceeds your regular rate of pay, such as the "and-a-half" part of time-and-a-half. To qualify, the Fair Labor Standards Act (FLSA) section 7 must require the overtime pay, and the payer must report it to the IRS.
For example, your regular rate is $20 per hour and your employer pays $30 per hour for overtime. The qualified part is the extra $10 for each overtime hour. All amounts in this example are fictional.
Payments that don't qualify
The following payments aren't qualified overtime compensation:
Premium pay.
Payment for certain shifts.
Qualified tips.
Payments to employees who state rules cover but the FLSA doesn't cover.
Deduction amount and limits
The deduction reduces your taxable income. The following limits apply:
The maximum deduction is $12,500, or $25,000 if you file a joint return.
The deduction is reduced when your modified adjusted gross income (MAGI) is over $150,000, or over $300,000 on a joint return.
The deduction applies to tax years 2025 through 2028.
You can claim the deduction whether you take the standard deduction or itemize.
Requirements
To claim the deduction, make sure that each of the following applies to you:
You include a valid Social Security number (SSN) on your tax return.
If you're married, you file a joint return.
Your payer reports your qualified overtime compensation to the IRS.
For the tax year, the IRS provides transition relief for taxpayers and for employers. If the amount of qualified overtime compensation isn't clear on your documents, ask your employer.