This bill would allow workers to deduct overtime pay from their taxable income, effectively reducing the federal taxes they owe on hours worked beyond their standard schedule. The law would apply to overtime compensation paid at time-and-a-half or higher rates for work exceeding 40 hours per week, whether required by the Fair Labor Standards Act or by a union or employer agreement made before the work was performed. The change would affect millions of American workers across all industries who regularly work overtime hours. The bill has no specified funding requirements since it reduces tax revenue rather than appropriating funds. The tax deduction would take effect for any overtime work performed in 2025 and beyond.
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