As we closed out the year, several dealers have asked the association about the overtime tax deduction eligibility for dealer personnel. The One Big Beautiful Bill Act (OBBBA) created a tax deduction for overtime available to certain qualifying employees for the 2025-2028 tax years. Under the bill, eligible employees must have “qualified overtime compensation,” which is defined as overtime required under the Fair Labor Standards Act (FLSA).
The FLSA specifically exempts salesman, partsman, or mechanics of establishments selling farm implements (29 U.S.C. §213(b)(10)(A)). Because these employees are specifically exempted from the FLSA, they do not receive “qualified overtime compensation” for the purposes of eligibility for the deduction. While most dealers pay overtime for salesman, partsman, and mechanics, those individuals will not be eligible for the overtime deduction under the OBBBA.
More clarification on the exemption and definition of salesman, partsman, or mechanics can be found in 29 CFR Sec. 779.372. While personnel meeting that criteria are not eligible for the overtime deduction, other non-salaried employees receiving qualified overtime compensation will likely be eligible.
To manage expectations and questions concerning this deduction, we have created a template notice for dealers to send employees ahead of the tax season. Please contact your association offices for any questions relating to this issue.
