No Tax on Overtime: What Farm Employees Need to Know

Many farm workers are hearing about the new “No Tax on Overtime” federal income tax deduction and wondering whether they qualify. With the 2025 tax filing season about to open, this article breaks down the key points so you can understand whether your overtime pay might be eligible for this deduction.

What is the “No Tax on Overtime” Deduction?

The One Big Beautiful Bill, signed into law on July 4, 2025, created a new tax deduction allowing certain workers to deduct up to $12,500 ($25,000 if married filing jointly) of qualifying overtime pay from their federal taxable income if the overtime meets specific rules. This deduction only applies to the premium portion of overtime, the “extra half” you earn when paid “time-and-a-half” but only when required by the Fair Labor Standards Act (FLSA).

Why Most Farm Employees Are Not Eligible

Under the FLSA, most agricultural work is exempt from federal overtime requirements. That means that federal law does not require most farm employers to pay overtime on hours worked beyond 40 hours a week. Farm work includes:

• Growing or harvesting crops, and any associated field work
• Raising and caring for livestock, bees, poultry or other animals – including milking
• Work generally performed by a farmer on a farm to plant, harvest or market agricultural commodities before they are processed into other goods

If your primary work falls under these categories, any overtime you received was not required by federal law, therefore it does not qualify the tax deduction. While you may have earned overtime for these tasks, it was either required by state law or voluntarily paid by your employer as a benefit. 

Who Might Be Eligible?

Some employees working for agricultural businesses do non-agricultural work, and those workers may qualify for this deduction. Some examples would include:

• Winery workers making wine and bottling craft beverages
• Retail or serving staff in an on-farm café or tasting room
• Workers making a value-added product by processing raw commodities into other goods

To qualify, your overtime must be required under the federal overtime rules meaning it is generally paid for any hours beyond 40 a week and paid at time-and-a-half.

How Do I Know Out If My Overtime Qualifies?

While you can certainly talk to your employer, these are some helpful questions to ask yourself and come to a determination:

1. What type of work do I actually do? If you spend most of your time doing traditional farm tasks, you likely don’t qualify for the deduction.   
2. Did I receive federally required overtime? While most farm workers did not, there are some job categories outside the federal agriculture definition that qualify. In these jobs, you likely would have received overtime at 40 hours and a rate of 1.5x your regular rate of pay.
3. If I think I might qualify, what was my overtime premium? Only the “half” of “time-and-a-half” qualifies so if you make $16/hr regularly, anything more than $24/hr overtime would have an additional premium that is not eligible for the deduction. In this example, the premium is $8/hr and the deduction is limited to $8 multiplied by the hours of overtime.

What You’ll Need For Your 2025 Tax Return

Because this deduction is new, and enacted halfway through 2025, there is no requirement that this qualifying overtime premium be listed separately on your 2025 W2   . Because of that, you may need to provide your tax preparer with some additional information if you think you qualify:

• Your final pay stub showing hours worked and the rate of pay for each earnings type (regular vs overtime)
• A description of your job duties
• Any additional records or employer-provided information about your overtime pay

Your tax preparer or tax software may ask additional questions to determine your eligibility. Be aware that there may be certain types of overtime called out on your paystub in states like New York, that offer tax credits for employers paying overtime to farm laborers. This overtime differs from what you would be eligible to deduct on your personal tax return.

Summary for Farm Employees

Most agricultural roles are exempt from the FLSA overtime requirements and are not eligible for this income tax deduction. However, some employees who perform non-agricultural duties within an agricultural business might qualify.

If you’re unsure, gather your information and have a discussion with your tax preparer to work together to take advantage of all the deductions you are eligible for.