Why “when does it start” is a confusing question
There are three different start dates people mean, and mixing them up is what makes the answer feel slippery:
- When the overtime counts from — January 1, 2025, retroactively.
- When the law was signed — July 4, 2025, about six months into that first year.
- When you see the money — at filing, which for the first year meant early 2026.
Nothing starts in your paycheck, which is the fourth thing people expect and the one that never happens. Overtime stays subject to withholding and to Social Security and Medicare tax throughout. See how the deduction works for the mechanics.
What changed between 2025 and 2026
The deduction itself did not change — same $12,500 cap ($25,000 joint), same phase-out above $150,000 of modified AGI ($300,000 joint). What changed is reporting. Tax year 2025 ran under transition relief: employers did not have to break out qualified overtime, and many used W-2 box 14 voluntarily. From tax year 2026, box 12 code TT is required, and the amount reported there is generally the amount you may deduct. If it looks too low, you need a corrected W-2 rather than your own arithmetic — that is covered on how to claim it.
Plan the years you have left
Four tax years is a short window, and the deduction is use-it-or-lose-it each year: unused room under the $12,500 cap does not carry forward. If you have any control over when overtime lands, that is worth knowing. Size a year at your own rate with the no tax on overtime calculator, and check who qualifies before counting on it — exempt salaried workers generally get nothing from this provision.