diff --git a/dlt/common/typing.py b/dlt/common/typing.py
index a0322fe01e..e9d14141a2 100644
--- a/dlt/common/typing.py
+++ b/dlt/common/typing.py
@@ -438,6 +438,10 @@ def get_generic_type_argument_from_instance(
     """
     orig_param_type = Any
     if cls_ := getattr(instance, "__orig_class__", None):
+        # unfurl Optional[Incremental[...]] to Incremental[...]
+        if is_optional_type(cls_):
+            cls_ = get_args(cls_)[0]
+
         # instance of generic class
         pass
     elif bases_ := get_original_bases(instance.__class__):
diff --git a/tests/common/test_typing.py b/tests/common/test_typing.py
index e81c3e7fa2..b7865ddb7f 100644
--- a/tests/common/test_typing.py
+++ b/tests/common/test_typing.py
@@ -1,3 +1,5 @@
+from types import SimpleNamespace
+
 import pytest
 from dataclasses import dataclass
 from typing import (
@@ -44,7 +46,9 @@
     is_annotated,
     is_callable_type,
     add_value_to_literal,
+    get_generic_type_argument_from_instance,
 )
+from dlt.extract import Incremental
 
 
 class TTestTyDi(TypedDict):
@@ -310,3 +314,17 @@ def test_add_value_to_literal() -> None:
     add_value_to_literal(TestSingleLiteral, "green")
     add_value_to_literal(TestSingleLiteral, "blue")
     assert get_args(TestSingleLiteral) == ("red", "green", "blue")
+
+
+def test_get_generic_type_argument_from_instance() -> None:
+    # generic contains hint
+    instance = SimpleNamespace(__orig_class__=Incremental[str])
+    assert get_generic_type_argument_from_instance(instance) is str
+    instance = SimpleNamespace(__orig_class__=Optional[Incremental[str]])
+    assert get_generic_type_argument_from_instance(instance) is str
+
+    # with sample values
+    instance = SimpleNamespace(__orig_class__=Incremental[Any])
+    assert get_generic_type_argument_from_instance(instance, 1) is int
+    instance = SimpleNamespace(__orig_class__=Optional[Incremental[Any]])
+    assert get_generic_type_argument_from_instance(instance, 1) is int