Get ready for a potential tax surprise! This year, you might just score a bigger refund if you've been working those extra hours. But here's the catch: it's not as straightforward as it seems.
Thanks to President Trump's tax bill, there's a new deduction for overtime pay on your 2025 federal returns. However, claiming it is a bit of a puzzle. Jon Gustafson, an expert from Venn Tax and Bookkeeping, says most workers can deduct overtime this tax season. The amount you can deduct depends on your income and marital status - up to $12,500 for singles and $25,000 for married couples.
Here's the tricky part: your employer doesn't have to separate overtime pay from your regular earnings on tax forms. So, you'll need to do some detective work and calculate your overtime pay yourself. Gustafson suggests grabbing your last pay stub from 2025 and figuring out the amount you earned from overtime. Then, calculate the premium - the easiest way is to divide your time-and-a-half pay by three. That's the magic number you'll need for your tax return deduction.
But here's where it gets controversial: next year, companies will be required to separate overtime pay on tax forms, making it a breeze for workers to claim this tax break. So, why the delay? And this is the part most people miss: the current system puts the onus on workers to calculate and claim their overtime deductions.
So, what do you think? Is this a fair system, or should employers be responsible for making it easier for workers to claim their overtime deductions? Let's discuss in the comments and share your thoughts on this tax twist!
