From 24/7 Wall St. · David Beren · · 1m 20s
Overtime Tax Break Saves 63-Year-Old $1,800
A 63-year-old worker saves $1,800 on taxes from overtime, not $8,000 as coworkers expect.
In brief
A 63-year-old worker saves $1,800 on taxes from overtime, not $8,000 as coworkers expect. A 63-year-old hourly worker saves $1,848 in federal taxes by claiming the 2025 overtime deduction, not the $8,000 his coworkers expect. Originally reported by 24/7 Wall St..
The Overtime Tax Myth
The break room believes a 63-year-old worker will get $8,000 back from the new overtime tax break.
“The break room has already done the math, and everyone is counting on a fat refund from the new overtime tax break”
The Real Savings
His actual federal savings are $1,848 after claiming the 2025 overtime deduction.
“His taxable income falls from $67,340 to $58,940, and both figures fall in the 22% bracket”
How the Deduction Works
Only the extra $14 per overtime hour qualifies for the deduction, not the full $42.
“The law covers overtime required under the Fair Labor Standards Act that is in excess of the regular rate”
Why $8,400 Turns Into $1,848
The deduction lowers taxable income from $67,340 to $58,940, saving $1,848 in federal taxes.
“His taxable income falls from $67,340 to $58,940, and both figures fall in the 22% bracket”
Key Rules for Claiming
The deduction maxes at $12,500 for single filers and phases out after $150,000 of income.
“The deduction maxes out at $12,500 ($25,000 on a joint return). It shrinks by $100 for each $1,000 of modified adjusted gross income over $150,000”
State Tax Variations
Only five states offer all three new tax breaks, including tips, overtime, and car-loan interest.
“Only Idaho, Iowa, Montana, North Dakota, and Oregon offer all three of the new breaks”
What Changes at Age 65
A separate senior deduction worth $6,000 kicks in once he reaches age 65.
“A separate senior deduction worth $6,000 kicks in once he’s reached age 65 before the close of the taxable year”
The W-2 Answer
His 2026 W-2 will show $8,400 in qualifying overtime, saving $1,848 in taxes.
“His 2026 W-2 will have the real answer in Box 12, Code TT”
The Real Savings
The deduction saves $1,848 in federal taxes after 22% income tax and payroll taxes.
“After 22% federal income tax and payroll taxes, his $25,200 of overtime shrinks to about $17,728”
The one thing
A 63-year-old hourly worker saves $1,848 in federal taxes by claiming the 2025 overtime deduction, not the $8,000 his coworkers expect.
