The IRS issued Fact Sheet 2026-01 on Friday, Jan. 23, to address frequently asked questions about the deduction for qualified overtime compensation in H.R. 1, commonly known as the One Big Beautiful Bill Act, and the Fair Labor Standards Act (FLSA).
Overtime compensation is considered qualified under H.R. 1 when it is required under Section 7 of the FLSA and when it exceeds the regular rate of pay. For example, if an individual is paid at “one and one-half times” their regular rate for an hour of overtime work, as the FLSA requires, the “half” portion of the “one and one-half times” is qualified overtime compensation, the IRS said.
The fact sheet explains that, generally, individuals eligible for overtime under the FLSA must receive overtime pay for hours worked in excess of 40 in a workweek at a rate not less than 1.5 times their regular rate of pay. Read more.