Nurses and Healthcare Workers: Your Overtime Tax Guide

If you're a nurse, CNA, medical technician, or any healthcare worker putting in overtime hours, listen up. The One Big Beautiful Bill Act just created a tax deduction that could save you thousands of dollars every year.

Starting in 2025, you can deduct up to $12,500 in overtime premium pay from your taxable income ($25,000 if you're married filing jointly). For a nurse in the 22% tax bracket who regularly works overtime, that's potentially $2,750 back in your pocket every single year.

This guide explains exactly how the overtime deduction works, who qualifies, and how much you'll actually save. No confusing tax language—just straight talk about a tax break that was literally designed for people like you.

What is the Overtime Tax Deduction?

The OBBB Act's "no tax on overtime" provision lets you deduct the premium portion of your overtime pay from your income taxes. Here's what that means in plain English:

When you work overtime, you typically earn time-and-a-half. So if your regular rate is $30/hour, overtime pays $45/hour. That extra $15 (the "half" in time-and-a-half) is what qualifies for the deduction.

Key details:

• Deduction available from 2025 through 2028
• Maximum deduction: $12,500 single, $25,000 married
• You don't need to itemize—everyone gets it
• Applies to W-2 employees who qualify for FLSA overtime

Who Qualifies for the Overtime Deduction?

To claim this deduction, you need to meet two main requirements:

1. You Must Be a Non-Exempt Employee Under FLSA

The Fair Labor Standards Act (FLSA) is the federal law that requires overtime pay. If you're entitled to overtime pay by law, you're probably eligible for this deduction.

Healthcare workers who typically qualify:

• Registered Nurses (RNs) - Most RNs are non-exempt and eligible
• Licensed Practical Nurses (LPNs)
• Certified Nursing Assistants (CNAs)
• Medical Assistants
• Pharmacy Technicians
• Lab Technicians and Medical Technologists
• Radiology Technicians
• Emergency Medical Technicians (EMTs) and Paramedics
• Home Health Aides
• Dental Hygienists and Assistants
• Physical Therapy Assistants
• Surgical Technologists

Who typically doesn't qualify:

• Doctors and physicians (usually exempt)
• Nurse practitioners (often exempt)
• Hospital administrators and managers
• Other salaried professionals earning over certain thresholds

If you're hourly and receive overtime pay, you almost certainly qualify. If you're salaried, it depends—but many salaried nurses and healthcare workers still qualify for overtime under FLSA.

2. You Must Report the Overtime on Your W-2

Your employer needs to separately report your qualified overtime compensation on your W-2. The IRS is providing guidance for employers on how to do this, so you don't need to worry about the paperwork—just make sure your W-2 is accurate when you receive it.

Understanding the "Premium Portion" Rule

This is the part that confuses people, so let's break it down with a concrete example:

Scenario: You're an RN earning $40/hour

You work 10 hours of overtime in a week at time-and-a-half ($60/hour). Here's what you earned:

• Regular rate component: $40/hour × 10 hours = $400
• Premium portion (the "half"): $20/hour × 10 hours = $200
• Total overtime earnings: $600

Only the $200 premium portion counts toward your deduction. Not the full $600.

Do this same calculation for all your overtime hours throughout the year. Add up all those premium portions, and that's your total deductible amount (up to the $12,500 or $25,000 limit).

Income Limits: Will You Still Qualify?

The deduction starts to phase out if you make over certain amounts:

• Single filers: Phase-out begins at $150,000
• Married filing jointly: Phase-out begins at $300,000

For most nurses and healthcare workers, these limits won't be an issue. Even if you work tons of overtime, you'd need to be earning well into six figures before the phase-out affects you.

And even above these limits, you still get a partial deduction—it just gradually reduces as your income increases.

Real Savings Examples for Healthcare Workers

Example 1: Hospital RN Working Regular Overtime

Regular rate: $38/hour
Overtime hours/year: 400 hours
Premium portion: $19/hour × 400 = $7,600
Tax bracket: 22%
Tax savings: $1,672/year

Example 2: Travel Nurse with Heavy Overtime

Regular rate: $45/hour
Overtime hours/year: 600 hours
Premium portion: $22.50/hour × 600 = $13,500 (capped at $12,500)
Tax bracket: 24%
Tax savings: $3,000/year

Example 3: CNA at Nursing Home

Regular rate: $18/hour
Overtime hours/year: 250 hours
Premium portion: $9/hour × 250 = $2,250
Tax bracket: 12%
Tax savings: $270/year

Example 4: Married Couple (Both Nurses)

Combined premium overtime: $20,000
Tax bracket: 24%
Tax savings: $4,800/year

Why This Matters for Healthcare Workers

Let's be honest: healthcare work is demanding. Long shifts, emotional toll, physical strain. And during staffing shortages or pandemics, overtime isn't optional—it's necessary to keep facilities running.

The overtime deduction recognizes this reality. It's saying: "We know you're working these extra hours because the system needs you. Here's a tax break."

For a nurse working regular overtime, this deduction could mean:

• $1,500-3,000+ back each year
• Over four years (2025-2028): $6,000-12,000+ in total savings
• Money to pay down student loans
• Build an emergency fund
• Actually take a vacation

How to Claim the Deduction

Claiming the overtime deduction is straightforward:

1. Work eligible overtime: Make sure you're a non-exempt employee receiving proper overtime pay
2. Check your W-2: Your employer should report qualified overtime compensation separately
3. File your taxes: Claim the deduction on your 2025 tax return (filed in early 2026)
4. Required info: Include your Social Security Number and file jointly if married

Tax software like TurboTax or H&R Block will handle the calculation automatically once you enter your W-2 information. Just make sure the software is updated for 2025 tax law.

Common Questions from Healthcare Workers

I'm salaried but still get overtime. Do I qualify?

Possibly! Many salaried nurses and healthcare workers are still classified as non-exempt under FLSA and receive overtime pay. If you get overtime pay, you should qualify for the deduction regardless of whether you're hourly or salaried.

What about double-time or holiday pay?

Yes! The premium portion of double-time, holiday pay, and any other extra compensation for overtime hours counts. The same principle applies—only the premium portion (what you earn above your regular rate) is deductible.

I work at multiple hospitals. Can I combine my overtime?

Absolutely. Add up the premium portion from all your jobs, up to the $12,500 ($25,000 married) limit.

Does this affect my payroll taxes?

No. You still pay Social Security and Medicare taxes on your full overtime amount. This deduction only reduces your income tax.

What if I'm an agency nurse or travel nurse?

As long as you're a W-2 employee (not an independent contractor) and you receive overtime pay subject to FLSA, you should qualify. Most agency and travel nursing positions are W-2, so you're probably good.

Per Diem and PRN Nurses

If you work per diem or PRN (as needed), you can still claim the deduction—as long as you work enough hours to trigger overtime pay. Many per diem nurses work 12+ hour shifts, and anything over 40 hours/week counts as overtime.

Just make sure your employer properly classifies and reports your overtime on your W-2.

Maxing Out Your Deduction

Want to maximize your tax savings? Here's how to hit that $12,500 limit:

At a $20/hour regular rate, the premium is $10/hour. To reach $12,500:

$12,500 ÷ $10 = 1,250 hours of overtime

That's about 24 hours of overtime per week, every week, for a full year. That's... a lot. Most healthcare workers won't hit the cap, which is fine—any deduction helps.

But if you're a travel nurse or someone who regularly picks up extra shifts, you might actually max out this deduction. And if you're married to another healthcare worker? You could potentially deduct $25,000 combined.

Planning for 2025-2028

This deduction is only available through 2028. That gives you four years to benefit from it. Here's how to think about it:

Year 1 (2025): Learn about the deduction, track your overtime
Year 2-3 (2026-2027): Maximize your benefit
Year 4 (2028): Last year to claim it (unless Congress extends it)

If you save $2,000/year from this deduction, that's $8,000 over four years. Not life-changing, but definitely meaningful.

What Happens After 2028?

Currently, the overtime deduction expires after 2028. Whether it gets extended depends on politics and budget priorities.

But here's the thing: tax breaks for healthcare workers tend to be popular. With ongoing nursing shortages and the critical role healthcare workers play, there's a decent chance this provision gets extended or even made permanent.

For now, take advantage of it while it's available.

Bottom Line for Healthcare Workers

If you're a nurse, CNA, medical tech, or any healthcare worker who puts in overtime hours, the OBBB Act just gave you a meaningful tax break. The overtime deduction can save you anywhere from a few hundred to several thousand dollars per year.

It's not complicated to claim. Your employer reports your qualified overtime on your W-2, you enter it in your tax software, and you get the deduction automatically.

Use our calculator to see your exact savings based on your situation. Keep good records of your overtime hours. And when you file your 2025 taxes in early 2026, make sure you claim this deduction.

You work hard. You deserve this break.