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ARTICLE · 25 AUGUST 2025

FLSA Overtime Reporting And Withholding

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The One Big Beautiful Bill Act (the Act), signed on July 4, 2025, allows a deduction from an individual's personal tax return on Form 1040 for "qualified overtime compensation" as defined in new Code § 225. The amount that can be deducted from the employee's return is capped at $12,500 with the maximum then adjusted down if the employee's AGI exceeds certain limits. This deduction is permitted in 2025.

United StatesEmployment and HR
Anthony G. Provenzano
Anthony G. Provenzano
Andrew W. Bagley
Andrew W. Bagley
Kristy J. Wrigley-Durer
Kristy J. Wrigley-Durer

The One Big Beautiful Bill Act (the Act), signed on July 4, 2025, allows a deduction from an individual's personal tax return on Form 1040 for "qualified overtime compensation" as defined in new Code § 225. The amount that can be deducted from the employee's return is capped at $12,500 with the maximum then adjusted down if the employee's AGI exceeds certain limits. This deduction is permitted in 2025.

Qualified Overtime Compensation

The term "qualified overtime compensation" (QOC) is defined under Code § 225 to include only the overtime paid as required under § 7 of the Fair Labor Standards Act (FLSA) in excess of the employee's "regular rate" (as defined in the FLSA); that is, QOC encompasses only the overtime premium over the employee's regular rate. (For example, a regular rate of $20 per hour yields on overtime payment of $30 per hour, which consists of the regular rate plus a $10 overtime premium.) And the definition's focus on the amount required under FLSA

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