Employees receiving “qualified” overtime will get a deduction under new rules in the Big Beautiful Bill. But there’s a caveat for ag producers.
Federal law exempts agricultural labor from the requirement to pay overtime at time-and-a-half under the Fair Labor Standards Act.
So, any overtime pay you give farm or ranch employees at regular rates won’t count as “qualified” overtime.
It’s important not to try to shift regular farm wages into “overtime” to help your employees get this deduction. If you file Form 943 and claim qualified overtime for farm workers, you risk penalties from the IRS.
Defining ‘Qualified’ Overtime
“Qualified overtime pay” refers specifically to overtime wages that federal law requires you to pay above an employee’s regular rate.
Under new rules in the BBB, employees who qualify can deduct up to $12,500 if they’re single or $25,000 if they’re married. But the deduction starts decreasing by 10% once your modified adjusted gross income goes over $150,000 if you’re single or $300,000 if you’re married.
Watch for more updates about the BBB, and if you have questions in the meantime, reach out to us.