The Overtime Wages Tax Relief Act would allow workers to deduct a portion of their overtime pay from their federal income taxes. Individuals could deduct up to $10,000 in overtime compensation annually (or $20,000 for joint returns), though this deduction phases out by $50 for each $1,000 of income exceeding $100,000 ($200,000 for joint returns). The bill defines eligible overtime as pay at least 1.5 times the regular rate for hours worked beyond 40 hours per week, either under the Fair Labor Standards Act or under a qualifying collective bargaining agreement. The changes would take effect for tax years beginning after December 31, 2025, and employers would be required to report overtime compensation amounts on worker tax forms. The legislation contains no explicit funding amount since it functions as a tax deduction rather than a direct spending program.
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