Does No Tax on Overtime Apply to Law Enforcement?

The federal “no tax on overtime” deduction does apply to law enforcement officers, but only to those whose overtime is required under the Fair Labor Standards Act, and only to the premium portion of that overtime pay. The One Big Beautiful Bill Act, signed July 4, 2025, lets eligible officers deduct that premium for tax years 2025 through 2028, subject to a $12,500 annual cap ($25,000 for joint filers) and a phase-out that begins at $150,000 of modified adjusted gross income ($300,000 joint).¹ The deduction is available whether you itemize or take the standard deduction.

What Actually Gets Deducted

The label oversells the law. You cannot deduct your full overtime paycheck. Only the premium above your regular rate qualifies. If your regular rate is $35 and your time-and-a-half rate is $52.50, the deductible amount is the $17.50 per overtime hour, not the $52.50.¹ At time-and-a-half, that works out to roughly one-third of each overtime dollar.

Two hard limits ride on top of that:

The maximum annual deduction is $12,500, or $25,000 for married couples filing jointly.
The deduction phases out once modified adjusted gross income passes $150,000 for single filers or $300,000 for joint filers.¹

That phase-out matters for career officers. Base salaries in larger and metropolitan agencies often climb into six figures before any overtime, and heavy overtime can push total income past the threshold. The same hours that generate the deduction can push you into the range where it starts to disappear.

How the FLSA Work Period Changes the Math for Officers

Only overtime required by the FLSA counts as “qualified overtime compensation.” Overtime paid voluntarily by an agency, or required only by a state law or union contract, does not qualify on its own.¹

For most workers, FLSA overtime starts after 40 hours in a workweek.² Law enforcement is different. Agencies can use a “work period” of 7 to 28 consecutive days. On a 28-day work period, FLSA overtime is only required after 171 hours, not the 160 a weekly calculation would suggest. Shorter work periods scale proportionally against that 171-hour threshold.³

The practical result: an officer on a 28-day cycle who works 170 hours has zero qualified overtime for this deduction, even if some individual weeks in that cycle went past 40 hours. Ask your payroll office what work period your agency uses. That schedule determines how many of your extra hours actually generate a deductible premium.

Officers Who Don’t Qualify

Several categories are shut out:

Officers in agencies with fewer than five sworn personnel. Those departments are exempt from FLSA overtime, so their officers have no qualified overtime to deduct, regardless of hours worked.
Command staff, administrators, and others classified as executive or professional employees exempt from FLSA overtime. Extra-hours pay for exempt officers does not count as qualified overtime.
Married officers who file separately. A joint return is required.¹
Anyone who does not include a Social Security number on the return.

The department-size cutoff is strict. An officer working 60-hour weeks at a four-person agency gets nothing from this law. The same officer at a six-person agency qualifies.

Payroll Taxes and Your Paycheck

The deduction reduces federal income tax only. Social Security tax at 6.2 percent and Medicare tax at 1.45 percent still apply to every overtime dollar. Federal and state income tax withholding on your overtime paychecks continues as before, because the deduction is claimed on your annual return rather than through adjusted withholding.¹ The savings arrive as a larger refund or smaller balance due at filing, not in your next check. Budget accordingly.

Getting the Number Onto Your Return

Employers must report the total qualified overtime compensation paid during the year, both to the IRS and to the employee, generally on your W-2 or an equivalent statement.¹ For tax year 2025, the IRS has issued transition relief because employers need time to update their payroll systems.⁴ If your W-2 for 2025 does not break out the premium portion of your overtime, keep your pay stubs and compute the premium yourself before filing. Reporting should be more standardized for 2026.

Check your state, too. If your state uses federal adjusted gross income as its starting point, the federal deduction may flow through to your state return. If your state decouples from federal changes, it may not. Your state revenue department is the source to confirm this.

What This Is Worth in Real Dollars

A patrol officer earning $35 an hour who works 400 hours of FLSA overtime at time-and-a-half brings in $21,000 in overtime pay. The deductible premium is $17.50 per hour, or $7,000. At a 22 percent marginal federal rate, that shaves about $1,540 off the federal tax bill for the year.

Hitting the $12,500 deduction cap would take roughly 714 overtime hours at that same rate, and would save about $2,750 at 22 percent. Officers in higher brackets save more per deducted dollar but sit closer to the $150,000 phase-out, which begins pulling the benefit back. It is a genuine reduction, and worth claiming, but nowhere near the full elimination the name suggests.

1
Internal Revenue Service. One, Big, Beautiful Bill Act: Tax Deductions for Working Americans and Seniors
2
Office of the Law Revision Counsel. 29 US Code 207 – Maximum Hours
3
U.S. Department of Labor. Overtime Pay
4
Internal Revenue Service. Treasury, IRS Provide Guidance for Individuals Who Received Tips or Overtime During Tax Year 2025