Due to the One Big Beautiful Bill Act (OBBBA) that was passed into law on July 4th of this year, there were some updates to the tax landscape, including new deductions for qualified overtime pay.

This provision allows for a tax deduction on personal returns for qualified overtime pay, capped at $12,500 per individual. Overtime will continue to be taxed on paychecks. The deduction applies only to the overtime hours required by the FLSA (typically work over 40 hours a week). It specifically covers the additional “half” of time and a half pay. 

The IRS has announced there are no changes to the standard W-2 form for 2025. Therefore, it is extremely important that your employees provide their tax accountant with their final paystub of 2025 that shows the year-to-date overtime. This will provide them with the accurate amount of overtime that can be used towards this deduction on their 2025 income taxes.

Starting in 2026 there will be new ways to track the qualified overtime amounts. We will keep you posted as updates are available.

All W-2 forms are required to be filed with the IRS no later than February 2, 2026. Again, there will be no change to the W-2 form in 2025, the last paystub is the proof for taxes. Should you have any questions, please do not hesitate to contact Tina in our payroll department.