Due to the provisions of the One Big Beautiful Bill Act (OBBBA), the IRS has announced a federal income tax deduction for qualified overtime compensation paid in tax year 2025.
Eligible employees may be able to deduct the qualified portion of overtime compensation paid in 2025 when filing their 2025 federal individual tax return (filed in 2026), subject to IRS limits and income phaseouts.
Your 2025 Form W-2 will remain unchanged and will continue to report total wages as in prior years. For tax year 2025, University of Utah employees will need to use their 12/22/2025 paycheck or final 2025 paycheck to view year-to-date overtime in the Hours and Earnings section.
For individual tax guidance, please refer to IRS.gov, the resources below or consult a tax advisor.
IRS Resources
- IRS Newsroom: Overtime Deduction Information
- Notice 2025-69 : Detailed guidance for individual taxpayers on how to calculate and claim deductions for qualified overtime compensation in 2025.
- IRS Publication 17, Your Federal Income Tax : includes instructions for the overtime deduction.
Questions about your overtime earnings or paycheck access?
Please visit the Human Resources website or contact the appropriate HR office.
Hospitals and Clinics employees: HR_Frontdesk@hsc.utah.edu
Campus employees: AskHR@utah.edu
This webpage is for informational purposes only. University of Utah Tax Services and Human Resources cannot provide individual tax advice or assist with preparing individual tax returns.
Frequently Asked Questions (FAQ)
Q: How much is the overtime deduction?
A1: Maximum annual deduction is $12,500 ($25,000 for joint filers).
A2: Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).
Q: How long is the overtime deduction available?
A: Under current federal law, the overtime deduction is available for tax years 2025 through 2028, unless extended or changed by future federal legislation.
Q: Is overtime pay completely tax-free now?
A: No. Eligible employees may claim a deduction in their individual tax return for qualified overtime compensation up to certain limits, but overtime pay remains subject to applicable payroll taxes.
Q: How do I find the overtime detail?
A: For tax year 2025, university employees should use their 12/22/2025 paycheck or final 2025 paycheck and reasonable methods to calculate the qualified portion.