Deduction for qualified overtime compensation

(a) Deduction allowed (1) In general Part VII of subchapter B of chapter 1, as amended by the preceding provisions of this Act, is amended by redesignating section 225 as section 226 and by inserting after section 224 the following new section: 225. Qualified overtime compensation (a) In general There shall be allowed as a deduction an amount equal to the qualified overtime compensation received during the taxable year. (b) Limitation based on modified adjusted gross income (1) In general No deduction shall be allowed by this section for any taxpayer if such taxpayer’s modified adjusted gross income for the taxable year exceeds $450,000 ($900,000, in the case of a joint return). (2) Modified adjusted gross income For purposes of this subsection, the term modified adjusted gross income means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933. (c) Qualified overtime compensation For purposes of this section, the term qualified overtime compensation means overtime compensation that is paid to an individual as required under section 7 of the Fair Labor Standards Act of 1938 and is in excess of the regular rate (as used in such section) at which such individual is employed. Such term shall not include any amount deducted under section 224.. (2) Clerical amendment The table of sections for part VII of subchapter B of chapter 1, as amended by the preceding provisions of this Act, is amended by redesignating the item relating to section 225 as relating to section 226 and by inserting after the item relating to section 224 the following new item: 225. Qualified overtime compensation.. (b) Deduction allowed to non-itemizers Section 63(b), as amended by the preceding provisions of this Act, is amended by striking and at the end of paragraph (4), by striking the period at the end of paragraph (5) and inserting, and, and by adding at the end the following new paragraph: (6) the deduction provided in section 225.. (c) Requirement To include overtime compensation on W–2 Section 6051(a) is amended by striking and at the end of paragraph (16), by striking the period at the end of paragraph (17) and inserting, and, and by inserting after paragraph (17) the following new paragraph: (18) the total amount of qualified overtime compensation (as defined in section 225(b)).. (d) Withholding The Secretary of the Treasury (or the Secretary’s delegate) shall modify the tables and procedures prescribed under section 3402(a) of the Internal Revenue Code of 1986 to take into account the deduction allowed under section 225 of such Code (as added by this Act). (e) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2025.