IRS Updates FAQs on the Qualified Overtime Deduction

Summary

On August 6, 2026, the Internal Revenue Service announced updated frequently asked questions on the deduction for qualified overtime compensation. The deduction allows eligible individuals to deduct qualified overtime pay when computing taxable income. Updated FAQs typically signal that the IRS is clarifying who qualifies, how the deduction is calculated, and how it is reported — details that matter directly to taxpayers whose income depends on overtime hours. Because the answers are meant to guide both taxpayers and preparers, anyone who expects to claim the deduction should review the current version of the FAQs rather than relying on older guidance.

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Our Take

For cross-border filers — especially Canadians working in the United States on visas such as TN or H-1B — the eligibility rules for the overtime deduction deserve close attention. Whether overtime pay counts as qualified, how employers report it, and how the deduction interacts with other parts of the return can all change the outcome. Because the U.S. and Canada treat overtime income differently, the same pay may be handled quite differently in each country's return, and the deduction claimed on the U.S. side will not automatically flow through to the Canadian filing. Taxpayers who may qualify should review the updated FAQs carefully and consult a CPA familiar with both tax systems before filing, so the deduction is claimed correctly and supporting documentation is in order.

Disclaimer: This article is general information only and does not constitute tax advice; it should not substitute professional tax counsel. Please consult a licensed CPA for advice specific to your situation.