What actually qualifies
Not your whole overtime paycheck. Only the premium: at $25 an hour, overtime pays $37.50, and just the $12.50 on top is deductible. It has to be overtime the federal FLSA requires, so hours past 40 in a week. Daily overtime that only your state requires, and any premium above 1.5x from a contract, don't count. You must be non-exempt, and joint filers must file jointly.
The cap and the phase-out
The deduction is capped at $12,500, or $25,000 on a joint return. It shrinks by $100 for every $1,000 of modified adjusted gross income over $150,000, or $300,000 joint, so it disappears entirely at $275,000 and $550,000. It's an above-the-line deduction, so you get it whether or not you itemize.
What it doesn't do
Your employer keeps withholding as normal, and Social Security, Medicare and state income tax still apply to every overtime dollar. The saving arrives as a bigger refund when you file. From tax year 2026 your W-2 reports qualified overtime separately in box 12, code TT, so keep your stubs for 2025. Work out the premium itself with the time and a half calculator or your full week with the overtime calculator.