Do salaried employees qualify for no tax on overtime?

Only if they are non-exempt under the FLSA, which depends on duties and salary level rather than on being paid a salary. Exempt employees get nothing from this deduction.

Can I claim it if I file married filing separately?

No. A married person must file jointly to claim it.

Do I need a Social Security number?

Yes, one valid for employment, and it must appear on the return. An ITIN does not qualify.

At what income does it disappear?

It starts shrinking above $150,000 of modified AGI, or $300,000 jointly. At the full cap it reaches zero at $275,000 and $550,000; with less qualified overtime it reaches zero earlier.

Who qualifies for no tax on overtime

Four conditions have to hold at once. Failing any one of them takes the deduction to zero regardless of how much overtime you worked.

One: your overtime has to be FLSA overtime

The deduction covers overtime that section 7 of the Fair Labor Standards Act required. If you are exempt, nothing qualifies, even if your employer pays an overtime premium as a matter of policy or under a union agreement.

Being salaried does not settle it. Exemption depends on duties and salary level, so plenty of salaried people are non-exempt and plenty of hourly arrangements are too. Federal employees have their own route: the FLSA category is recorded in block 35 of the SF-50, where E means exempt and N means overtime-eligible.

Two: you need a Social Security number

Section 225(d) denies the deduction unless the return includes an SSN valid for employment. An ITIN will not serve. Where both spouses have qualified overtime, both SSNs have to be on the return.

Three: married people have to file jointly

Section 225(e) blocks the deduction for a married individual unless they file a joint return with their spouse. Married filing separately gets nothing from this provision at all, which can reverse the usual arithmetic on whether separate filing pays.

Four: your income has to be low enough

Above $150,000 of modified AGI, or $300,000 on a joint return, the deduction falls by $100 for every full $1,000 of excess. With the full cap claimed it runs out at $275,000 single and $550,000 joint, but with a smaller amount of qualified overtime it disappears much sooner.

MAGI, single	Reduction	Deduction left	MAGI, joint	Deduction left
$150,000	$0	$12,500	$300,000	$25,000
$160,000	$1,000	$11,500	$310,000	$24,000
$180,000	$3,000	$9,500	$330,000	$22,000
$200,000	$5,000	$7,500	$350,000	$20,000
$240,000	$9,000	$3,500	$390,000	$16,000
$275,000	$12,500	$0	$425,000	$12,500

Assumes qualified overtime at or above the cap. With less than the cap the deduction runs out sooner.

Modified AGI here is AGI increased by amounts excluded under sections 911, 931 and 933. Because the deduction itself does not reduce AGI, it cannot bring you back under the threshold.

Common questions

Do salaried employees qualify for no tax on overtime?: Only if they are non-exempt under the FLSA, which depends on duties and salary level rather than on being paid a salary. Exempt employees get nothing from this deduction.
Can I claim it if I file married filing separately?: No. A married person must file jointly to claim it.
Do I need a Social Security number?: Yes, one valid for employment, and it must appear on the return. An ITIN does not qualify.
At what income does it disappear?: It starts shrinking above $150,000 of modified AGI, or $300,000 jointly. At the full cap it reaches zero at $275,000 and $550,000; with less qualified overtime it reaches zero earlier.