Discover how the One Big Beautiful Bill, also known as the Working Families Tax Cut adds the new “No Tax on Overtime” rule for 2025–2028. This video breaks down how eligible workers can deduct overtime pay on their federal tax returns, who qualifies, the income limits, and how to get ready.
Maximize your tax savings with this new deduction for qualified overtime pay. Available for the 2025 to 2028 tax years, this deduction can cut your taxable income by as much as $12,500 ($25,000 for joint filers). But the deduction is reduced if your income is above a certain amount.
No tax on overtime pay
OBBBA allows eligible workers to deduct "qualified overtime pay" on federal returns. The break is capped at $12,500 for single filers or $25,000 for married couples filing jointly. This tax break phases out for higher earners. This is a tax break only for overtime pay, not all wages.
No Tax on Overtime retroactively took effect on January 1, 2025, and remains in effect through December 31, 2028. Congress could decide to extend it.
One Big Beautiful Bill Tax Law Changes for your 2026 (and on) tax returns
New tax brackets for 2026
The amount of taxes you will pay depends on how much you make each year. Income under $58,523 will be taxed at 14 per cent. Incomes from $58,523 to $117,045 will be taxed at 20.5 per cent.
Washington, D.C.—Workers receiving their first paychecks of 2026 are finding them bigger than ever thanks to the Working Families Tax Cuts spearheaded by U.S. Senate Finance Committee Chairman Mike Crapo (R-Idaho).
The "No Tax on Overtime" provision (part of the 2025 OBBB Act) works as a federal income tax deduction, allowing eligible employees to reduce taxable income by the premium portion (the extra half) of their time-and-a-half pay, up to $12,500 ($25,000 joint), for tax years 2025-2028, phasing out at higher incomes but still subject to payroll taxes.
To avoid the 22% tax bracket (or any higher bracket), focus on reducing your taxable income through strategies like maxing out 401(k)s and HSAs, deferring bonuses, tax-loss harvesting, smart charitable giving, and strategic asset location, understanding that higher rates only apply to income within that bracket, not your entire income.
For 2026, the key taxable wage base is the Social Security wage base, which increased to $184,500, up from $176,100 in 2025, while the Federal Unemployment Tax (FUTA) wage base remains unchanged at $7,000. State Unemployment Insurance (SUI) wage bases vary significantly by state, with many states setting their own higher limits, such as Washington's $78,200 and New York's $13,000 for 2026, as they adjust annually.
“No tax on tips” is the name given to a new tax deduction for tip income created by the “One Big Beautiful Bill” (also known as the Working Families Tax Cut), which was signed into law in July 2025. The tip deduction is available for the 2025 through 2028 tax years.
WASHINGTON — The wealthiest 1 percent of Americans are the nation's most egregious tax evaders, failing to pay as much as $163 billion in owed taxes per year, according to a Treasury Department report released on Wednesday.
If the individual tax cuts expire, taxpayers in all income groups would face higher and more complicated taxes. Machinery and equipment expensing is a key provision that, if allowed to expire, would especially harm capital-intensive industries like manufacturing.
Did the no tax on overtime pass? Yes. The no tax on overtime bill was included in the One Big Beautiful Bill that President Trump signed into law in July 2025. This new law creates a first-of-its-kind tax exemption for certain overtime pay, effective beginning in tax year 2025.
For FY 2025–26 (AY 2026–27), the new tax regime applies progressive tax slabs starting with nil tax up to ₹4 lakh, zero tax liability up to ₹12 lakh through rebate, a higher effective tax-free limit for salaried individuals, and fewer exemptions.
The IRS in October released new federal income tax brackets for 2026. The inflation-based change increased the income ranges for the two lowest tax brackets by about 4%, and the higher ones by roughly 2.3% compared to 2025.
At a glance. If your total income is between £100,000 and £125,140, the tapering of the personal allowance means you could end up paying an effective 60% income tax rate. Almost 725,000 workers will fall into the 60% tax trap in 2025-26, according to HMRC, up from about 300,000 in 2017-2018.
For a $17.50/hour rate, overtime pay (typically time-and-a-half) is $26.25 per hour ($17.50 x 1.5) for hours worked over 40 in a week, resulting in $420 for 8 hours of overtime, or an extra $210 on top of regular pay for 8 overtime hours. The basic calculation is your hourly rate (e.g., $17.50) multiplied by 1.5 (for time-and-a-half) and then by the number of overtime hours worked.
This amount is also commonly referred to as the taxable maximum. For earnings in 2026, this base is $184,500. The OASDI tax rate for wages paid in 2026 is set by statute at 6.2 percent for employees and employers, each.
The standard deduction is a specific dollar amount that reduces the amount of taxable income. The standard deduction consists of the sum of the basic standard deduction and any additional standard deduction amounts for age and/or blindness. In general, the IRS adjusts the standard deduction each year for inflation.
The changes announced are: From 1 July 2026, the 16% tax rate, which applies to taxable income between $18,201 and $45,000, would be reduced to 15% From 1 July 2027, this tax rate would be further reduced to 14%.