Many Americans are receiving larger tax refunds this season, thanks to the new “no tax on overtime” deduction introduced by President Trump’s 2025 legislation. This provision allows eligible workers to deduct up to $12,500 for single filers and $25,000 for married couples from their overtime pay, significantly impacting nearly 20 million tax returns filed this year. Treasury Secretary Scott Bessent noted that this deduction has been claimed on 25% of returns, highlighting its popularity among filers.
The surge in overtime deduction claims is notable, especially as it surpasses other new tax breaks from the legislation. However, experts caution that the deduction’s complexity could lead to filing errors, particularly due to waived employer reporting requirements for 2025. Clarity may improve in future years as mandatory reporting is implemented, which could change how taxpayers experience the benefit.
As the overtime deduction is set to expire after 2028, its future remains uncertain. Congress may face challenges in extending the deduction, especially if it proves to be more costly than anticipated, though there is bipartisan interest in expanding its eligibility to more workers.
Source: cnbc.com