The 2025 Overtime Deduction, part of Schedule 1-A, applies only to the 'half' portion of time-and-a-half pay, not the entire overtime rate. Maximum deductions are $12,500 for singles and $25,000 for married couples filing jointly.
Income phase-outs begin at $150,000 (single) or $300,000 (married), eliminating the deduction entirely at $275,000 and $550,000 respectively.
Eligibility requires coverage under the Fair Labor Standards Act (FLSA); exempt employees like white-collar workers and teachers do not qualify. Employers may not consistently report qualified overtime, so taxpayers should verify W-2 Box 14 or pay stubs.
IRS Notice 2025-69 outlines calculation methods. Proper documentation is critical to avoid audit risks.