BBB Overtime Tax Exemtion Question?

[go_deep]

In the Big Beautiful Bill there is no tax on overtime, the amount that's greater than your normal hourly pay.
If your getting paid overtime, can your employer exempt for example your first 5 hours and label them as standby, so you can't benefit from the tax exemption of those overtime hours?
These 5 hours would be paid at 1.5x your hourly work rate, and they're worked hours.

What benefit would the employer have exempting those hours? They're still paying the same dollar amount out at the end of the month, right?

 

[mntnguide]

There is still tax on OT...you just can deduct "X" amount off taxes at end of year, from OT worked. Not really sure i understand what you are asking for though. Anything over 40hrs a week and paid at 1.5x is looked at. . I worked over 600 hours OT last year, just did my tax return and thanks to the new bill, more than doubled my tax return after inputting the OT pay for deduction. But it is not something that happens on individual paychecks throughout the year

 

[JFK]

That’s encouraging. I worked over 600 hours OT last year as well.

Is the deduction for OT pay or the taxes paid on OT pay?

 

[HuntHarder]

Look at income thresholds, alot will make too much for this to apply to them.

 

[go_deep]

There is still tax on OT...you just can deduct "X" amount off taxes at end of year, from OT worked. Not really sure i understand what you are asking for though. Anything over 40hrs a week and paid at 1.5x is looked at. . I worked over 600 hours OT last year, just did my tax return and thanks to the new bill, more than doubled my tax return after inputting the OT pay for deduction. But it is not something that happens on individual paychecks throughout the year

My employer is saying they want to exempt some of our OT hours by labeling then as standby from being tax exempt. So we would have to still pay taxes on those first 5 hours.

It makes zero sense to me, my employer has to pay out the money either way, but by doing this it negatively impacts us the employee from being able to not pay taxes on those first 5 hours of OT.

 

[go_deep]

That’s encouraging. I worked over 600 hours OT last year as well.

Is the deduction for OT pay or the taxes paid on OT pay?

It'll get returned to you in the form of a tax refund, but it's only the amount over your regular pay.
So if you make $20 an hour, get paid $30 an hour on OT, the tax exempt amount is only $10 an hour of that overtime amount.

 

[wapitibob]

I've been on the other end of employers doing some creative financing to lessen their burden while increasing mine. I would suspect the employer is getting a benefit from their maneuver.

 

[mntnguide]

Look at income thresholds, alot will make too much for this to apply to them.

If you gross over 150k, which I was, you still get deductions, it just goes down depending on how much over that you are. And im talking a single individual, dual income households might make to much for it to matter depending

My employer is saying they want to exempt some of our OT hours by labeling then as standby from being tax exempt. So we would have to still pay taxes on those first 5 hours.

It makes zero sense to me, my employer has to pay out the money either way, but by doing this it negatively impacts us the employee from being able to not pay taxes on those first 5 hours of OT.

gotcha.. that's above my lineman brain there. . im sure an actual cpa or someone on here can answer with more clarity for ya

 

[Tony Nile]

I logged 1275 hours of OT in '25. My wife doesn't work, so I will be below the married threshold!