OBBBA Tax Deduction for Construction Workers
Construction workers often see seasonal overtime spikes tied to project deadlines and weather windows. Two wrinkles are common in this trade: prevailing-wage (Davis-Bacon) jobs with fringe-benefit pay, and the fact that many construction workers are actually 1099 subcontractors, not W-2 employees.
Qualifies
- The overtime premium (extra 0.5×) on hours over 40/week for W-2, non-exempt hourly workers
- Overtime premium earned on prevailing-wage jobs, to the extent it's a true FLSA overtime premium (not a fringe-benefit payment)
Doesn't qualify
- Fringe-benefit payments on certified-payroll/prevailing-wage jobs — these are a separate pay component from the FLSA overtime premium
- Hours worked as a 1099 independent subcontractor — the FLSA overtime premium (and this deduction) applies to employees, not independent contractors, regardless of how many hours you put in
- Per-diem or travel pay for out-of-town jobs — not overtime premium
Worked example
A single filer with $52,000 regular wages + $8,000 overtime premium pay (federal only — your state may also tax this income; check the State Conformity Tracker):
- Net OBBBA deduction: $8,000
- Estimated federal tax saved: $1,760
- FICA still owed on overtime pay: $1,836 — not reduced by this deduction
Common questions
I work a prevailing-wage (Davis-Bacon) job — does the fringe-benefit portion count?
No. Fringe-benefit payments on certified-payroll jobs are a separate pay component from the FLSA overtime premium. Only the actual overtime premium — the 0.5× add-on for hours over 40 — is what the OBBBA deduction targets.
I'm a 1099 subcontractor working 60-hour weeks — do I get this deduction?
Not through the overtime deduction — FLSA overtime (and this deduction) applies to employees. As an independent contractor, there's no overtime premium since you're not covered by FLSA overtime rules in the first place.