Beginning in 2025, the IRS will allow workers to deduct the overtime premium—the extra half-time pay earned for working more than 40 hours a week—from their federal taxable income. Regular hourly wages are still taxed, but the overtime bonus portion is excluded. To qualify, you must be an hourly worker covered by federal overtime rules. Salaried employees exempt from overtime do not qualify, and only true overtime pay—not shift differentials or bonuses—is eligible. This deduction is set to run through 2028 unless Congress extends it. For many hourly employees, from nurses to warehouse workers, this could add up to thousands more in take-home pay over the next few years.