Federal “No Tax on Overtime” Provision
President Trump’s recently passed “One Big Beautiful Bill” includes a federal tax provision that may provide meaningful relief for law enforcement officers, corrections professionals, firefighters, and other public safety employees who regularly work overtime due to staffing shortages and operational demands.
Under this provision, eligible workers may deduct up to $12,500 in qualified overtime pay from their federal taxable income each year. For members who file jointly, the deduction increases to $25,000. The provision is scheduled to apply to tax years 2025 through 2028.
For peace officers and corrections staff, overtime often represents a significant portion of annual earnings, driven by mandatory staffing levels, court coverage, emergencies, and vacancy backfill. This deduction applies only to overtime compensation and does not affect base wages. It applies only at the federal level and does not change state or local tax rules at this time.
The Police Officers Association of Michigan encourages all members to stay informed about this provision and to discuss it with a qualified tax professional when planning future finances or preparing tax returns. As the IRS clarifies implementation guidance and eligibility details, POAM will continue to share updates that may impact our membership.
This provision recognizes the realities of public safety work and the long hours our members contribute to serving their communities.
Disclaimer:
This information is provided for general awareness purposes only. The Police Officers Association of Michigan does not provide tax, legal, or financial advice. Individual circumstances vary, and members are strongly encouraged to consult with a licensed CPA, tax professional, or financial advisor to determine how this provision may apply to their personal situation. IRS information indicates the federal deduction is based on overtime earned under FLSA requirements. It is unclear if the deduction will also apply to overtime earned under collective bargaining agreement provisions, for example, overtime hours worked in a given workday. All members are encouraged to discuss the details and application of the deduction with their tax advisor.