Starting this tax season, individuals who make less than $150,000 can deduct up to $12,500 of their qualified overtime pay from their federal taxable income.
Taxpayers can deduct the extra pay earned as part of their overtime premium, not the whole amount earned while working overtime — essentially, the "half" in time-and-a-half.
The new tax policy was implemented as part of the Big Beautiful Bill passed in 2025 alongside other Trump administration initiatives like "no tax on tips."
While the overtime deductions won't impact the state's tax revenue, Lindsey Baker with the Missouri Budget Project said the change will disproportionally harm low-income households.
"Those tax cuts were paired with significant cuts to services," Baker said. "And many of those services are part of federal programs like Medicaid, like SNAP, or food assistance, that flow through state budget."
The Tax Policy Center, a nonpartisan think tank, reports many low-income earners would see an average of $0 to $20 on their tax return due to the change.
"The problem is it just doesn't actually reach the people that it needs to reach," Baker said. "This is an example of one of those types of tax cuts that's really more of a gimmick than actual benefit."
Only 7.9% of people reported making overtime in Missouri, according to the Peter G. Peterson Foundation, a nonpartisan, nonprofit organization.
The new deduction must be manually calculated this year, as employers were not required to report the premium overtime separately.
Taxpayers can receive free help on their tax return through the Volunteer Income Tax Assistance program.
According to the IRS, VITA programs assist taxpayers with low to moderate incomes who make less than $57,000, as well as those with disabilities.
In Columbia, VITA staff can be found at the MU Family Impact Center in Columbia and are available for walk-ins. Services will pause between March 21 and 29 due to Mizzou's Spring Break and then will continue through the end of Tax Day on April 15.
Visit MU Extension's page on the Volunteer Income Tax Assistance program for the MU Family Impact Center's hours of operation.
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