Qualified Overtime Income refers to overtime wages that are eligible for a federal income tax deduction under the One Big Beautiful Bill Act, effective for tax years 2025-2028. This isn't about all overtime pay—only the premium portion (that extra half of "time-and-a-half") for hours worked beyond 40 in a workweek under federal labor standards. If you're a non-exempt employee earning this qualifying overtime, you can deduct up to $12,500 ($25,000 if married filing jointly) from your federal taxable income when you file your tax return.

The benefit phases out for higher earners and only affects federal income taxes—you'll still pay Social Security, Medicare, and state taxes on all your overtime. But for many, working extra hours to improve their financial situation, this deduction can mean keeping more of what they've earned through their additional effort and time.