Overtime Deduction Calculation & Tips for 2025
This article will guide you on how to find overtime and tipped information on your pay statements.
- Pull up your paystub from ESS
- If you are a non-exempt employee with comp pay that accrues at 1.5, you are also able to deduct that using the same method below.
- If you are unsure if you are exempt or non-exempt, reach out to your agency's HR representative.
- Find overtime pay lines on your pay statements and divide by 3. 1/3 of the overtime is what is deductible on your tax return
- For tax years 2025 through 2028, individuals who receive qualified overtime compensation may deduct the pay that exceeds their regular rate of pay (generally, the “half” portion of “time-and-a-half” compensation)
- To find your tipped income, refer to your pay statement and look for the Taxable Non-Cash Earnings > Tipped Income. The full amount is deductible up to $25,000
To confirm your eligibility and amounts, refer to the IRS guidance below or consult a tax professional.
- For more information, please reference the IRS Notice 2025-69
- https://www.irs.gov/newsroom/questions-and-answers-about-the-new-deduction-for-qualified-overtime-compensation
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