It all turns on one word: non-exempt
The 2025 overtime deduction lets you deduct the premium half of your overtime — but only overtime the federal Fair Labor Standards Act actually requires: time-and-a-half for hours worked past 40 in a workweek. That overtime is only owed to non-exempt employees. So eligibility isn't about your industry or job title — it's about whether you're exempt or non-exempt under the FLSA.
What Unlocks the Deduction
FLSA-required overtime (time-and-a-half past 40 hrs/wk)
You Must Be
A non-exempt employee
Exemption Salary Level (2026)
$684/week · $35,568/year
Exemption Also Requires
Salary-basis test + duties test — all three
1099 Contractors
Not eligible — no FLSA overtime
Deduction Cap
$12,500 single · $25,000 joint (2025–2028)
The three-part exemption test
An employer can only treat a worker as exempt from overtime under a “white-collar” exemption (executive, administrative, or professional) if the employee meets all three of these — miss any one and the employee is non-exempt and owed overtime:
- Salary basis: paid a fixed salary that doesn't vary with hours or quality of work.
- Salary level: at least $684 per week ($35,568 a year) as of 2026. The 2024 rule that would have raised this was struck down in court in late 2024, and the DOL restored the $684 level — so confirm the current figure, as it has been in flux.
- Duties test: the job's actual day-to-day duties fit the exemption (genuinely managing, exercising independent judgment on significant matters, or doing advanced professional work).
Two more categories — outside sales and certain computer employees — have their own rules. And independent contractors sit outside the FLSA entirely, so there's no FLSA overtime for them to deduct.
— Title doesn't decide it —
A worker called an “assistant manager” who spends the day doing the same work as the crew often fails the duties test — making them non-exempt and owed overtime they can now deduct. If you were paid FLSA overtime, you qualify, whatever your title; if you weren't, the question is whether you should have been.
Overtime guides by occupation
We publish a deep guide for each overtime-heavy occupation — the pay-structure quirks, what counts as FLSA premium, and the amounts commonly missed. Find yours:
Found yourself on the qualifying side?
If you were paid FLSA overtime in 2025, the premium half is deductible — see the overtime deduction guide for how the “premium half” math works, the Schedule 1-A walkthrough for where it goes on the return, and the amended-return guide if your 2025 return already missed it. We also publish deep guides for the overtime-heavy occupations — nurses, trades, factory, warehouse, and more.
General information on the 2025 federal rules (P.L. 119-21) and FLSA classification, not legal or tax advice. Exempt/non-exempt status turns on specific facts; a licensed professional confirms your eligibility and qualified overtime from your pay records before any filing.