Definition
Extra pay of at least one and a half times the regular rate for hours over 40 in a workweek, required for many workers by federal law.
What it means
Under the federal Fair Labor Standards Act, non-exempt employees must receive overtime of at least 1.5 times their regular rate of pay for every hour over 40 in a workweek. Some states, such as California, also require daily overtime. Certain salaried executive, administrative and professional employees can be exempt if they meet duties tests and are paid at least a salary threshold; after a court vacated the 2024 rule, the Department of Labor enforces the 2019 level of $684 a week. For tax years 2025 through 2028, workers can deduct up to $12,500 of qualified overtime compensation, $25,000 for joint filers, which counts only the premium portion above the regular rate, with phase-outs above $150,000 of modified AGI, or $300,000 joint.
Example
An hourly worker paid $20 an hour who works 45 hours in a week earns $800 for 40 hours plus 5 x $30 = $150 of overtime, for $950. The $50 premium part may count toward the overtime deduction.
Illustrative numbers only. Your situation will differ.