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Overtime Tax Break Confusion: Workers Face Complex Filing Rules

New York Times Business •
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President Trump's 'no tax on overtime' promise has left workers like Eric Schweitzer confused as they file taxes. Despite the simple branding, the new law only exempts the additional 'half' in time-and-a-half pay from federal income tax, while payroll and state taxes still apply. The rule covers only workers eligible for overtime under federal standards, creating unexpected limitations for many.

More than 14 million tax returns have claimed the overtime deduction so far, making it one of the largest new tax cuts. The retroactive application to 2025 means workers could see bigger refunds this year, with Republicans hoping the extra cash will boost the economy and help in midterm elections. However, the complexity has created a 'wild West' scenario where companies vary in providing necessary information to employees.

Workers like Jae Shanks face mathematical challenges calculating eligible deductions, with some discovering discrepancies between their calculations and employer-provided figures. The IRS will eventually require companies to detail overtime amounts, but for now, employees must navigate confusing rules that vary by state and employer. As Nancy Rick put it, she'll claim the deduction and deal with any corrections later, reflecting the uncertainty many workers face this filing season.