IRS Fact Sheet on Overtime Deduction

As discussed on pages 29 to 34 of the Tax Year 2025 M+O=CPE Individual Tax Reference Book, the new deduction for overtime pay is limited to employees who receive overtime that is required by the federal Fair Labor Standards Act.

Determining if an employee is subject to the federal Fair Labor Standards Act will be one of the challenges facing practitioners this tax season.

The IRS recently issued a fact sheet that reviews the provisions of the new deduction (https://www.irs.gov/newsroom/questions-and-answers-about-the-new-deduction-for-qualified-overtime-compensation).

Question 3 of the fact sheet provides guidance for federal employees to determine whether they are covered by the Fair Labor Standards Act.