Trump’s ‘no tax on overtime’ deduction could risk filing mistakes
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Millions of taxpayers have already filed to claim President Donald Trump’s new “no taxes on overtime” deduction. But experts say some filers may be at risk of making errors on their tax returns.
The law, which came into force with Trump’s “big beautiful bill”, overtime tax deduction It allows certain employees to deduct up to $12,500 for singles filing jointly or $25,000 for married couples filing jointly from 2025 through 2028.
The interruption continues in a new form known as: Table 1-Awhich feeds into individual tax returns. The program also includes Trump’s new tax breaks for tip income, senior citizens and auto loan interest.
As of March 4, the IRS had received almost 56 million returns, 43 percent of which included Schedule 1-A, Social Security Administration Commissioner and IRS CEO Frank Bisignano told the House Ways and Means Committee this week. hearing. Overtime deduction is the “largest application category” for this form, he said.
Trump’s overtime cut only specific type of earningsAccording to the IRS.
You must receive compensation under the Fair Labor Standards Act, or FLSA. The law says non-exempt employees must be paid at least 1.5 times the regular rate when they work more than 40 hours a week. However, some workers under state or employment contracts are excluded.
According to one study, approximately 98 million workers will be eligible for overtime under the FLSA in 2023. 2024 analysis From the Budget Lab at Yale. However, only 8% of hourly employees and 4% of salaried employees have regular FLSA-approved overtime.
Overtime pay is generally concentrated in industries such as manufacturing, healthcare, transportation and public safety. February 10 report from the Cato Institute, a libertarian think tank.
Why your overtime deduction might be wrong
Experts say it may not be clear for workers this filing season how much to claim for overtime deductions.
US Treasury and IRS Department in November Reporting requirements for employers were waived for the 2025 tax year. This means that some employees will not have overtime listed on so-called information returns, such as their W-2 or 1099 Forms.
Instead, some employees may need payroll statements or their last pay stub for 2025 to calculate overtime totals. However, the deduction is only for “overtime bonus”; If overtime is 1.5 times the normal rate, it is half part.
I think this cut may be greatly exaggerated.
Tom O’Saben
director of tax content and government relations at the National Association of Tax Professionals
“I think this deduction is greatly overrated,” Tom O’Saben, director of tax content and government relations for the National Association of Tax Professionals, told CNBC.
If you see a lump sum on the payroll statement, here’s how you calculate the overtime bonus: I divide by 3 Divide by 4 for 1.5 times your regular salary or 2 times your regular salary, according to the IRS.
There’s no evidence that applicants overclaim the overtime deduction, “but that’s certainly a theoretical concern of mine,” said Andrew Lautz, tax policy director at the Bipartisan Policy Center, a nonprofit think tank. “People just make honest mistakes,” he said.
Alternatively, if tax forms don’t show overtime pay, some filers may “gamble” by inflating their earnings, while others with smaller overtime amounts may skip the deduction to avoid problems, Lautz said.
“These are all possibilities given the lack of employer reporting structure in place,” he said.
