The Internal Revenue Service (IRS) released Form 1040 Schedule 1-A and accompanying instructions for tax year 2025 explaining how workers may claim the new deduction for qualified overtime under the One Big Beautiful Bill Act. Under the guidance, taxpayers may deduct up to $12,500 in qualified overtime pay, or $25,000 for joint filers, with the deduction phasing out for individuals with modified adjusted gross income above $150,000 ($300,000 for joint filers). The instructions define qualified overtime as compensation paid under the Fair Labor Standards Act and provide worksheets and examples to help taxpayers calculate the deductible portion of overtime pay. Workers may claim the deduction whether they itemize or take the standard deduction, though married taxpayers must file jointly.
