20M used ‘no‑tax on overtime’
Nearly 20 million tax returns have already claimed the ‘no tax on overtime’ deduction — a major factor shrinking some refunds this season, per Treasury/CNBC reporting. (cnbc.com)
The new overtime deduction lets eligible workers exclude up to $12,500 of qualified overtime pay (or $25,000 for joint filers) from taxable income for tax years 2025 through 2028. (irs.gov) The benefit phases out: the deduction begins to reduce once modified adjusted gross income exceeds $150,000 for single filers and $300,000 for joint filers, with the law reducing the credit by $100 for every $1,000 above those thresholds. (bakertilly.com) For the 2025 filing year the IRS and Treasury allowed reporting relief — employers aren’t required to show qualified overtime separately on W‑2s and 1099s for 2025, and the agencies issued an FAQ fact sheet on Jan. 23, 2026 explaining how taxpayers should claim the deduction. (irs.gov) Tax‑industry trackers say the overtime break is one of the largest new items claimed this season: one firm reported more than 15.5 million of about 63.5 million processed returns included the overtime deduction as of early March, a contributor to refunds that are on average more than 10% larger year‑over‑year. (fidelity.com) Tax professionals and Treasury officials have flagged risks to filing accuracy and potential reporting mismatches because payroll systems and W‑2 boxes were not universally updated for 2025, and Treasury has been ordered to issue regulations to limit abuse and define eligible occupations. (cupahr.org) Treasury officials have publicly praised the provision as a success while lawmakers from both parties now face pressure over whether to extend or revise the temporary 2025–2028 deduction after accounting for uptake, eligibility questions and the cost to revenue. (cnbc.com)
