On-Demand Webinar
Navigating the "No Tax on Overtime" Rule: What Payroll Professionals Must Know
CE credits
- 1.50 HRCI (Human Resource Certification Institute)
- 1.50 SHRM (Society for Human Resource Management)
- 1.50 RCH (American Payroll Association)
- 1.50 ATATX (Aurora Accounting)
- 1.50 ATAHR (Aurora HR)
- 1.50 ATAPR (Aurora Payroll)
What You'll Learn
On July 4, 2025, the “One Big Beautiful Bill Act” (OBBBA) was signed into law, introducing the most significant tax break on employee wages in decades. Central to this legislation is the groundbreaking “No Tax on Overtime” provision, which allows eligible employees to deduct up to $12,500 of qualifying overtime pay from their federal taxable income. This webinar will provide payroll professionals with a comprehensive breakdown of the new tax treatment and what it means for payroll operations going forward.
- Understand the federal tax deduction for overtime pay, including who qualifies and how it is applied.
- Identify income phase-out rules and wage thresholds that impact eligibility.
- Learn how this provision interacts with Social Security, Medicare, and applicable state taxes.
- Get step-by-step guidance on updating payroll systems and processes for compliance.
- Ensure accurate year-end reporting by mastering the new W-2 requirements.
- Build a clear communication plan to educate employees and leadership on the new benefit.
View Full Description
Designed specifically for payroll processors and service providers, this session delivers everything needed to implement the OBBBA changes with confidence. From defining eligibility and navigating income phase-out thresholds to updating payroll systems and ensuring proper W-2 reporting, every aspect of the law will be covered. Attendees will also gain insight into developing employee education strategies to help workers maximize their tax savings and avoid filing errors. Whether you're managing in-house payroll or advising clients, this timely session will prepare you to handle the transition smoothly and compliantly.
This webinar offers critical insights and tools to help you stay compliant and support your workforce. Gain the expertise you need to confidently implement one of the most impactful tax law changes in recent history.
Level: Beginner/Intermediate
Format: Live webcast
Instructional Method: Group: Internet-based
NASBA Field of Study: Taxes
Program Prerequisites: None
Advance Preparation: None
Meet Your Speaker
Christine Stolpe
Passionate about furthering an understanding of payroll, Christine Stolpe, CPP has been working in some fashion of payroll for the past 30 years and enjoys watching the profession blossom through emotional intelligence and personal fortitude. In 2019, she opened her own payroll consulting...
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CE Credits
These are the continuing education credits available to you for this webinar.
- 1.50 HRCI
Human Resource Certification Institute Browse HRCI-approved webinars and earn recertification credits online. Live and on-demand HR training for PHR, SPHR, and GPHR recertification. Expert-led sessions from Aurora Training Advantage. - 1.50 SHRM
Society for Human Resource Management Aurora Training Advantage is recognized by SHRM to offer Professional Development Credits (PDCs) for the SHRM-CPSM or SHRM-SCPSM. For more information about certification or recertification, please visit www.shrmcertification.org. - 1.50 RCH
American Payroll Association Aurora Training Advantage is an approved provider through the American Payroll Association. To receive credit through the American Payroll Association for this program you MUST attend the program in its entirety.
- 1.50 ATATX Aurora Accounting Aurora Training Advantage is offering continuing education points designed to recognize dedication to training and excellence in accounting.
- 1.50 ATAHR Aurora HR Aurora Training Advantage is offering continuing education points designed to recognize dedication to training and excellence in human resources.
- 1.50 ATAPR Aurora Payroll Aurora Training Advantage is offering continuing education points designed to recognize dedication to training and excellence in payroll.
Frequently Asked Questions
What is the No Tax on Overtime provision in the One Big Beautiful Bill Act?
The No Tax on Overtime provision, enacted as part of the One Big Beautiful Bill Act signed on July 4, 2025, represents one of the most significant changes to employee compensation taxation in recent decades. Under this provision, eligible employees can deduct up to $12,500 of qualifying overtime pay from their federal taxable income per year. This means overtime earnings up to that threshold are effectively sheltered from federal income tax, increasing the take-home value of overtime work for qualifying employees. The provision is designed to incentivize workforce participation and reward employees who work beyond standard hours. For payroll professionals, the change introduces new complexity in how overtime pay is identified, tracked, and reported on W-2 forms. The deduction applies to FLSA overtime—hours worked beyond 40 per week—and is subject to income phase-out rules that reduce the benefit for higher-earning employees. Payroll teams must update systems promptly and educate employees on how the change affects their withholding and annual tax filing obligations under the new law.
Who qualifies for the federal overtime pay tax deduction under the One Big Beautiful Bill Act?
Eligibility for the No Tax on Overtime deduction under the One Big Beautiful Bill Act is determined by several criteria. First, the employee must earn qualifying overtime pay—defined as compensation for hours worked in excess of 40 per week under the FLSA. Second, the deduction is subject to income phase-out thresholds, meaning employees whose total compensation exceeds certain income levels will see the deduction reduced or eliminated. The phase-out structure is designed to target the benefit toward middle-income wage earners. Hourly workers and non-exempt salaried employees who regularly earn FLSA overtime are the primary beneficiaries of this provision. The deduction applies to federal taxable income, but payroll professionals must also assess how it interacts with state tax obligations, as states have varying approaches to conformity with federal tax law changes. Social Security and Medicare taxes are generally not affected by the deduction, as these apply to gross wages. Employers should ensure payroll systems are configured to correctly identify qualifying overtime wages and apply deduction rules consistently across their entire workforce without errors.
How do income phase-out thresholds affect eligibility for the No Tax on Overtime benefit?
The No Tax on Overtime deduction under the One Big Beautiful Bill Act is subject to income phase-out thresholds that reduce its value for higher-earning employees. As an employee's total income rises above a specified threshold, the maximum deductible overtime amount is gradually reduced, eventually phasing out entirely for high earners. This tiered structure ensures the tax benefit is concentrated among workers most likely to earn regular overtime—typically hourly and non-exempt salaried employees in manufacturing, healthcare, hospitality, and logistics. For payroll professionals, the phase-out rules add complexity to withholding calculations, as the effective deduction varies by employee based on their projected annual income. Employers should implement or update payroll system configurations to apply phase-out calculations dynamically as employees' year-to-date earnings fluctuate throughout the year. Communicating the phase-out rules clearly to employees is also important—workers who expect the full tax benefit may be surprised by their actual withholding if they earn above the threshold. Expert payroll training helps practitioners navigate these nuances and avoid under- or over-withholding scenarios that affect employee satisfaction and compliance.
How should payroll systems be updated to comply with the No Tax on Overtime rule?
Updating payroll systems to comply with the No Tax on Overtime provision of the One Big Beautiful Bill Act requires a systematic approach covering wage coding, calculation logic, and reporting. Payroll teams must ensure overtime pay earnings codes are properly configured to identify qualifying FLSA overtime separately from other pay types such as bonuses, shift differentials, or premium pay that may not qualify for the deduction. The system must apply the income phase-out calculation to determine each employee's effective deductible overtime amount based on year-to-date total compensation. Tax withholding tables must be updated to reduce federal income tax withholding on qualifying overtime wages up to the applicable limit. Year-end W-2 reporting must accurately reflect the overtime deduction amounts consistent with IRS guidance on the new requirements. Payroll vendors are releasing system updates to support these changes, but payroll professionals must validate that configurations meet regulatory requirements for their specific workforce. Parallel testing with historical payroll data before going live is strongly recommended. Documenting system changes and maintaining audit trails ensures organizations can demonstrate compliance during any future IRS review.
What are the W-2 reporting requirements under the No Tax on Overtime law?
The No Tax on Overtime provision introduced by the One Big Beautiful Bill Act creates new W-2 reporting requirements that payroll professionals must understand and implement correctly for year-end processing. The IRS is expected to issue specific guidance on how qualifying overtime deduction amounts should be reported, likely using a dedicated box or code to identify deductible overtime wages separately from total compensation. Accurate W-2 reporting is critical because employees need this information to correctly claim the deduction on their individual federal tax returns or to confirm that withholding adjustments were applied appropriately during the year. Misreporting overtime deduction amounts on W-2s can result in employee filing errors, IRS notices, and potential penalties for employers. Payroll teams should monitor IRS guidance closely as it is released and ensure payroll software vendors update W-2 generation modules accordingly. Year-end payroll audits should include a specific check on overtime deduction reporting to verify accuracy before W-2s are distributed. Proactive employee communication explaining how the W-2 reflects the No Tax on Overtime benefit reduces confusion and supports a smooth tax filing season for the entire workforce.