What is an Overtime deduction phase-out?
An overtime deduction phase-out is the graduated reduction mechanism that decreases the tax-free overtime deduction available under the One Big Beautiful Bill Act for higher-income workers. The phase-out begins at modified adjusted gross income of $150,000 for single filers and $300,000 for married couples filing jointly, reducing the maximum $12,500 deduction ($25,000 for joint filers) by $100 for every $1,000 earned above these thresholds. The complete phase-out occurs at $275,000 for single filers and $550,000 for joint filers, ensuring that benefits primarily reach middle-income workers. Strategic Traditional 401k contributions and Health savings account deposits can reduce modified AGI to preserve overtime deduction eligibility while building retirement and healthcare savings for Individuals.
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