Is overtime no longer taxable?

Despite the “No Tax on Overtime” label, the overtime deduction does not completely eliminate taxes on overtime pay. Some people may still owe federal and/or state income tax on their overtime pay, and payroll taxes still apply to it. The overtime deduction is temporary – it only applies for the 2025 to 2028 tax years.

Is overtime really not going to be taxed?

Yes, No Tax on Overtime was bundled into the sweeping tax act that became law on July 4, 2025. It also included a separate provision called “No Tax on Tips,” which allows certain taxpayers in eligible occupations to deduct up to $25,000 in voluntary tipped income from their federal tax return.

How will the no tax on overtime work in 2026?

This new law allows non-exempt hourly employees under the Fair Labor Standards Act (FLSA) to take a federal income tax deduction for the total amount of “qualified overtime compensation” received. Eligible employees can claim the deduction on their federal tax returns starting with the tax year 2025 through 2028.

What are the rules for overtime pay in Minnesota?

Minnesota overtime laws require time-and-a-half pay for hours worked over 48 in a workweek, but most businesses fall under federal law (FLSA) requiring overtime after 40 hours; pay is 1.5x the regular rate, with exceptions for some jobs and rules for minors, and employers must track all hours worked, even short breaks.
 

Are you taxed more if you work overtime?

Overtime isn't taxed at a higher rate than regular pay, but it feels like it because higher earnings can push you into a higher tax bracket, and employers often withhold at a flat supplemental rate; however, a new temporary federal deduction for 2025-2028 allows you to deduct up to $12,500 (or $25,000 joint) of qualified overtime income, reducing your taxable income when you file, though payroll taxes (FICA) and state taxes still apply. 

No tax on overtime: What workers need to know about the new tax break

Did Trump get rid of taxes on overtime?

Yes. The no tax on overtime bill was included in the One Big Beautiful Bill that President Trump signed into law in July 2025. This new law creates a first-of-its-kind tax exemption for certain overtime pay, effective beginning in tax year 2025.

At what point is overtime not worth it?

Overtime stops being worth it when the diminishing returns outweigh the benefits, often seen with constant fatigue, burnout, strained relationships, and health risks, or when high tax rates and lost benefits (like tax credits or subsidies) significantly reduce the take-home pay, making the extra hours feel less impactful for marginal dollars, especially beyond 50-60 hours weekly. It becomes a poor trade-off when personal time, sleep, and family life are consistently sacrificed for pay that feels minimal after taxes. 

What is the new rule on overtime?

The main "new overtime rule" for 2025-2028 is a temporary federal tax break, the "No Tax on Overtime" provision, allowing workers to deduct up to $12,500 (or $25,000 joint) of their "time-and-a-half" overtime pay from federal income tax, phasing out at higher incomes. For exempt employee status under the Fair Labor Standards Act (FLSA), previous salary threshold increases from 2024 were challenged in court, so the older 2019 rules (like the $684/week minimum) generally apply for now, with DOL still enforcing those pending new rulings.
 

Is it illegal to work over 40 hours and not get overtime?

In California, employers are required by law to provide 1.5x pay for every hour an employee works beyond: 40 hours in a workweek. 8 hours in a workday. 6 days in a workweek.

How many hours can you work without a break in MN?

Meal Breaks

Current Rule: Employers must provide "sufficient time" for a meal when an employee works eight or more consecutive hours; 30 minutes is ordinarily sufficient. New Rule (2026): Employers must provide a 30-minute meal break whenever an employee works six or more consecutive hours.

Is OT not taxable in 2025?

When does the “No Tax on Overtime” deduction start? The “no tax on overtime” deduction is retroactively effective on January 1, 2025. So, if you qualify, you can claim the deduction for the first time on your federal income tax return for the 2025 tax year (which you'll file in 2026).

Can each parent gift $18,000 to a child?

Yes, in 2024, each parent could gift $18,000 to a child without tax implications, meaning a couple could gift $36,000 per child, and for 2025/2026, that amount increases to $19,000 per parent, or $38,000 per couple, without needing to file a gift tax return, thanks to the annual gift tax exclusion.
 

Has the Big Beautiful Bill passed?

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, resulting in changes to federal student aid programs. Some of these changes went into effect immediately, while others will go into effect next year and beyond.

How do I get no tax on overtime?

Starting January 1, 2025, a designated amount of qualifying overtime pay will be exempt from federal income tax under the One Big Beautiful Bill Act (OBBBA). You can deduct up to $12,500 (for most filers) or $25,000 (Married Filing Jointly) in overtime pay from your taxable income.

How much tax will I pay if I do overtime?

You pay regular income tax rates on overtime, but new 2025-2028 US law lets you deduct up to $12,500 (or $25k joint) of the extra half of overtime pay from federal income tax when you file, reducing your tax bill, though payroll taxes (FICA) still apply, and you might see higher initial withholding. The deduction lowers your overall taxable income for the year, but your total income (regular + overtime) still determines your marginal tax bracket. 

Is it better to work overtime or get a second job?

Working overtime can be a great way for people to earn extra money without getting second jobs or part-time gigs. But is it worth it? Adding a couple of hours to your work schedule to get some extra cash can be good, but it can also set your career goals back and even impact your health.

What states don't tax overtime?

Alabama has taken the lead in states offering tax exemption on overtime. Since January 1, 2024, it stands as the only state fully exempting overtime pay from state income tax.

What is the 8 and 80 rule for overtime?

The “8 and 80” exception allows employers to pay one and one-half times the employee's regular rate for all hours worked in excess of 8 in a workday and 80 in a fourteen-day period.

What is OT for $20 an hour?

For $20 an hour, standard overtime (time-and-a-half) is $30 per hour ($20 x 1.5), paid for hours worked over 40 in a workweek, according to the Fair Labor Standards Act (FLSA). To calculate total pay, multiply regular hours by $20 and overtime hours by $30, then add them together. 

Is Trump cutting taxes on overtime?

The budget bill, passed in July, followed up on a key Trump campaign promise to eliminate taxes on overtime pay. Even better: the law is retroactive to the beginning of 2025, giving those who work overtime an additional six months of tax-free wages ahead of all the money the bill will save them going forward.

Does overtime trigger higher taxes?

No. Overtime isn't taxed at a higher rate than your regular pay. But your paycheck withholding might make it look that way.

What salary is exempt from overtime?

The federal overtime exempt salary threshold under the Fair Labor Standards Act (FLSA) reverted to the 2019 level of $35,568 annually ($684 per week) after court challenges blocked the Department of Labor's 2024 rule increases, meaning this threshold remains in effect for 2026, though the DOL plans future reviews and some states have higher thresholds. Employees earning below this threshold must receive overtime pay for hours over 40 in a workweek unless they meet specific job duties tests. 

Why is no tax on overtime bad?

No tax on overtime is considered bad policy by many economists because it creates tax inequity, potentially costs the government billions in lost revenue, encourages employers to rely on overtime instead of hiring, and can be exploited by highly paid individuals, ultimately shifting the tax burden and potentially harming public services and future Social Security benefits. It's seen as a loophole that benefits a few while creating complex tax code issues and distorting labor markets, say experts from the Tax Foundation and the Center for Economic and Policy Research, as noted by the Tax Foundation. 

How many hours of overtime can I legally work?

California law defines overtime as any hours worked beyond 8 in a single workday or 40 in a single workweek for nonexempt employees. Employers must pay one-and-a-half times the employee's regular rate of pay for these additional hours.

What's the most hours you can legally work?

In the U.S., there's generally no federal limit to how many hours adults (16+) can work, but the Fair Labor Standards Act (FLSA) mandates overtime pay (1.5x regular rate) for non-exempt employees for hours over 40 in a workweek, though some states or specific jobs (like truckers) have extra rules. While you can technically work 168 hours in a week, federal and state laws often require breaks, and some states have rules for days off, while specific industries have unique rules, like for airline crews.