Starting this tax season, individuals can deduct up to $12,500 of their overtime pay from their federal taxable income. Taxpayers can deduct the extra pay earned as part of their overtime premium, not the whole amount earned while working overtime.
The new tax policy was implemented as part of the Big Beautiful Bill passed in 2025 alongside other Trump administration initiatives like “no tax on tips.”
While the overtime deductions won’t impact the state’s tax revenue, Research Director Lindsey Baker with the Missouri Budget Project said the change will disproportionally harm low-income Missourians.
“Those tax cuts were paired with significant cuts to services,” Baker said. “And many of those services are part of federal programs like Medicaid, like SNAP, or food assistance, that flow through state budget.”
The Tax Policy Center, a nonpartisan think tank, reports many low-income earners would see an average of zero to 20 dollars on their tax return. The overtime deduction phases out for individuals whose income exceeds $150,000.
“The problem is it just doesn't actually reach the people that it needs to reach,” Baker said. “This is an example of one of those types of tax cuts that's really more of a gimmick than actual benefit.”
Only 7.9% of people reported making overtime in Missouri in 2024, according to the Peter G. Peterson Foundation, a non-partisan, non-profit organization. Qualifying taxpayers must calculate their deduction manually this year because tax forms are not yet updated.
Taxpayers can receive free help on their tax return through the Volunteer Income Tax Assistance program. VITA programs assist taxpayers with low to moderate incomes who generally make $69,000 or less annually, according to the IRS.
The MU Family Impact Center in Columbia hosts VITA staff and is walk-in only. Its services will pause between March 21 and 29 due to spring break and resume until the end of Tax Day on April 15.
