A Friendly Heads-Up from Your CPA
If you worked overtime this year, there’s some good news tucked inside the OBBBA that you’ll want to know about before tax season sneaks up on you.
What’s the deal?
The OBBBA allows an above-the-line deduction for overtime pay.
That means this deduction reduces your adjusted gross income (AGI) before itemized or standard deductions are even considered. Translation? It can help lower your taxable income even if you don’t itemize. 🎉
But here’s the important catch (CPA moment 🤓):
The deduction applies only to the overtime portion of your overtime pay — not the entire check.
In most cases, overtime is paid at time-and-a-half, so roughly:
- ⅓ of the amount labeled “overtime” represents the premium portion that may qualify
- The other ⅔ is essentially your regular wages
One more very important thing:
🚨 KEEP YOUR FINAL PAYCHECK OF THE YEAR (the last time you received money not (pay period) when you earned money!)🚨
Your W-2 will likely NOT break out overtime vs. regular pay. If we can’t see what portion of your wages was overtime, we can’t properly calculate this deduction. That last paystub is essential for accurate tax preparation.
📌 CPA Pro Tip:
Save a PDF or screenshot of that final paycheck now. Your future self (and your CPA) will thank you.
As always, tax rules are subject to IRS guidance and individual circumstances matter — but a little record-keeping now can make a big difference later.
Your trusted CPA is always available to help you!
