No Tax on Overtime: Key Facts

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The “One Big Beautiful Bill Act,” signed on July 4, 2025, included a “No Tax on Overtime” provision that affects employees who earn overtime pay.  This does not change how overtime is paid or taxed on paychecks, but it may reduce taxable income on annual tax returns.

Here are some things to keep in mind: 

• The deduction is effective for calendar years 2025 through 2028.
• The deduction applies to UVA’s hourly employees who work over 40 hours per week.
• Only the “half-time” portion of overtime pay qualifies for the deduction.
• Straight time pay during holidays or PTO does not qualify for the deduction.

Let our Payroll Team know if you have questions; we’re happy to help!