How No Tax on Overtime Pay is Creating Havoc on Tax Returns & Getting it Right in 2025

If you’re expecting big tax savings from the new “no tax on overtime” rule, you might be surprised by how much smaller the actual deduction is. In this video, I explain exactly how the overtime tax deduction works under the new law so you can calculate it correctly and avoid surprises on your 2025 tax return. The rule only allows you to deduct the premium portion of FLSA-mandated overtime pay — not the full overtime amount. This has left many small business owners and taxpayers confused. I break it down with clear examples and simple formulas so you know exactly what qualifies and how to report it properly. In this video, I cover: 📌Why the overtime deduction is often much smaller than people expected 📌How to calculate the deductible premium portion (easy division methods for time-and-a-half and double-time) 📌What counts as qualifying FLSA overtime vs. what doesn’t (bonuses, union premiums, state rules, etc.) 📌How to report the deduction on your 2025 tax return (new Schedule 1A and Form 1040) Income limits, phaseouts, and who can actually claim the deduction 📌IRS transition year leniency for 2025 and what it means for you 📌State tax differences and important things to watch for Whether you’re a small business owner paying overtime, an employee working extra hours, or someone trying to maximize every available deduction, this practical guide will help you get your overtime taxes right and avoid costly mistakes. Stop guessing and start calculating with confidence. I’ll show you the straightforward way to handle this new rule on your tax return. 👍Like this video if it cleared up the confusion for you 📖Subscribe to Small Business Journey for clear explanations of the latest tax changes 👇Comment below with your overtime situation — I read and reply to every comment!