Treasury, IRS issue FAQs to address the new deduction for qualified overtime compensation under the One, Big, Beautiful Bill

IR-2026-10, Jan. 23, 2026

WASHINGTON - The Department of the Treasury and the Internal Revenue Service today issued frequently asked questions in Fact Sheet 2026-01 related to the new deduction for qualified overtime compensation under the One, Big, Beautiful Bill.

For tax years 2025 through 2028, individuals who receive qualified overtime compensation may deduct the amount that exceeds their regular rate of pay (generally, the "half" portion of "time-and-a-half" compensation) and is reported on a Form W-2 or Form 1099.

These FAQs contain additional information about the deduction, provide resources for employees (including federal employees) to assist them in determining whether they received qualified overtime compensation under the Fair Labor Standards Act, and contain useful information regarding the differences in reporting requirements for tax year 2025 and 2026-2028.

Treasury and IRS previously issued Notice 2025-62 PDFproviding penalty relief to employers and other payers for tax year 2025 regarding new information reporting requirements for qualified overtime compensation; and issued Notice 2025-69 PDFfor workers eligible to claim the deduction for overtime compensation for tax year 2025.

For more information, see One, Big, Beautiful Bill Provisions on IRS.gov.