No tax on overtime costs $89.6 billion. Treasury counted 29 million filers who already claimed it.

"No tax on overtime" was signed into law on July 4, 2025, as part of the One Big Beautiful Bill Act — a four-year deduction, not a permanent exemption, for the portion of overtime pay that exceeds a worker's regular hourly rate.▸ By the Joint Committee on Taxation's own scoring of the enacted text, it costs the federal government $89.6 billion in foregone revenue between fiscal 2025 and 2034. It also has a first real year of data behind it now: the U.S. Treasury reports that more than 29 million filers claimed it on the tax-year-2025 returns filed this spring — a bigger population, right out of the gate, than the administration's own economists modeled before the bill passed.

The deduction, reported on the new Schedule 1-A, only exempts part of an overtime paycheck.▸ Per the IRS's own guidance: if a worker is paid "one and one-half times" their regular rate for an hour of overtime, only the extra "half" — the premium required by the Fair Labor Standards Act — counts as qualified overtime compensation. The base hourly rate for that hour stays taxable, same as before. The deduction is capped at $12,500 a year for a single filer and $25,000 for a married couple filing jointly, and it phases out above $150,000 (single) or $300,000 (joint) in modified adjusted gross income. It sunsets after December 31, 2028.

That sunset shows up directly in the government's own cost projections.▸ The provision is cheap in its first partial year, peaks the following year, and is scored at zero once it expires:

FY2026 — the fiscal year that covers the tax-year-2025 returns filed this spring — absorbs the largest single hit, $32.8 billion.▸ The cost then declines through FY2029 as the deduction winds down, and drops to zero in FY2030, one full year after the law's own sunset date. Unless a future Congress votes to extend it, the provision is designed to cost the Treasury nothing at all within five years of taking effect.

Treasury's tallies grew through the filing season.▸ An April 15, 2026 Treasury release put claims, as of Tax Day, at "over 25 million" filers with an average deduction above $3,100. By its July 2, 2026 release — marking one year since the law was signed — that count, boosted by extension filers catching up, had grown to over 29 million, still averaging more than $3,100 a filer. Treasury also published an income breakdown of who is claiming it:

Treasury reported the first two figures directly — 75% of claimants earned under $100,000, and 96% earned under $200,000 — which by subtraction implies 21% earned $100,000–$200,000 and 4% earned more than that.

That 29-million-filer count is worth holding up against the number the government itself used to model the deduction before it existed.▸ In a May 2025 analysis of the House-passed version of the bill, the White House Council of Economic Advisers estimated that 101.7 million U.S. workers were eligible for overtime under the FLSA — but that "only 20 percent of them regularly work overtime," based on American Community Survey data. Twenty percent of 101.7 million is roughly 20 million workers. Actual claims came in at nearly 9 million more than that, filed in the deduction's very first season. The gap doesn't necessarily mean anything went wrong — the CEA's "regularly" threshold is narrower than the law's actual eligibility rule, which asks only whether a worker earned qualifying overtime pay at all during the year, not how often. But it does mean the deduction's real first-year reach outran the estimate the administration built its own growth projections on.

Part of that gap may be mechanical.▸ For tax year 2025, the IRS did not require employers to separately report qualified overtime compensation on a W-2, 1099-NEC, or 1099-MISC. A worker whose employer didn't supply a separate statement had to calculate the deductible amount themselves, using the Schedule 1-A instructions — sorting the FLSA-required "half" premium out of a pay stub that, for most jobs, was never designed to show that split. Tax preparers flagged this as a real source of both under-claiming and over-claiming in the deduction's debut season. The mechanism gets more automated going forward — employers face separate overtime-pay reporting requirements in future tax years — but the tax-year-2025 numbers above were produced by the honor-system version.

Cost figures reflect the Joint Committee on Taxation's present-law score of the enacted text (JCX-35-25, July 1, 2025); claimant and income figures are Treasury's own tallies for tax-year-2025 returns filed through July 2, 2026 and will shift as remaining extension returns are filed.