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A bigger trip might be hiding in those overtime hours. For 2025–2028, eligible nonexempt workers can deduct the FLSA overtime premium, the extra “half” of time and a half, from federal taxable income, often becoming a larger refund that fits flights, hotels, and tours. The perk is capped and phases out at higher incomes, and it doesn’t change payroll or state taxes. In short, the travel boost is real but bounded, ideal for ambitious plans without overcommitting.
More cash for trips
Because it’s an above the line deduction, the benefit typically shows up at filing, not each payday, perfect for lump sum moves like locking award seats or paying resort balances. Travelers who proactively adjust withholding may see some relief earlier, but regular withholding continues as usual. That timing twist makes qualified overtime better for big itinerary decisions than small weekly upgrades.
Caps that map to travel
Deductible qualified overtime premium is capped at $12,500 for single filers and $25,000 for married filing jointly, with a parallel tips deduction up to $25,000. The savings equal the deduction times a filer’s marginal rate, for example, at 22 percent, $5,000 in qualified OT premium can cut tax by about $1,100. Pairing caps with realistic fare windows can turn a domestic escape into a shoulder season Europe plan.
Who benefits most
Phase outs begin at modified AGI of $150,000 for single filers and $300,000 for joint filers, reducing or eventually eliminating the deduction as income rises. Middle income hourly and service workers with steady FLSA qualified overtime see the clearest travel uplift, while higher earners’ gains taper and very low liability filers may see little change. The average impact is meaningful yet modest.
It’s federal only relief
This isn’t fully tax free overtime. Social Security and Medicare still apply, and state or local income taxes remain. Only federal income tax is reduced via a deduction for the qualifying FLSA OT premium. In practice, budget with net of payroll math, using the federal savings to unlock the trip pieces that move the needle, long haul flights, room upgrades, or tour deposits.
Refund timing matters
Withholding systems may not fully capture the deduction midyear, so the practical travel fund often arrives as larger refunds for 2025–2028, paid 2026–2029. The provision applies to overtime premium earned starting January 1, 2025, which can boost the first year’s refund. That schedule pairs naturally with fare sales and award calendars, turning tax timing into a booking advantage.
Qualifying overtime rules
Eligibility follows FLSA standards, time and a half for hours beyond 40 in a week, and only the premium half is deductible. Overtime required solely by state daily OT rules, union agreements, or employer policy does not qualify, and exempt employees aren’t eligible. Two heavy hours workers can therefore see different results, so verify which hours meet FLSA definitions.
Paystub clarity counts
Many pay statements don’t clearly separate FLSA weekly OT from daily OT or other premiums, complicating claims. Employers must provide year end reporting of qualified overtime, with transitional relief anticipated in the first year. Clean categorization helps ensure the deduction, and the travel budget, land as planned, preventing refund shortfalls that disrupt bookings.
Employer ripple effects
Some employers may lean on overtime rather than new hires, creating more FLSA qualified hours for certain roles and broadening who can channel tax savings into travel. Access remains uneven, so coworkers with similar base pay may end up with very different vacation budgets depending on schedules, demand cycles, and how reliably OT is available.
Service worker stack
Workers who both earn tips and work FLSA qualified overtime can potentially use parallel deductions within each cap and phase out, building a larger pool for travel. Tips remain taxable and subject to withholding, the deduction is claimed at filing. In hospitality and retail, where both income streams are common, that stack can turn an ordinary refund into a strategic trip fund.
Plan with caution
The overtime provision sunsets after 2028 and sits within a broader law with staggered effective dates. Analysts view the package as significant but not the largest ever. A practical playbook, price trips ambitiously, confirm paystub coding for FLSA OT, adjust withholding if needed, and wait for the first return to verify realized savings before locking in non refundable spend.