No Tax on Overtime Act

Summary#

This bill would let certain overtime pay be deducted from taxable income. It changes the Internal Revenue Code to define "qualified overtime compensation." That definition has two parts: (A) overtime pay required under section 7 of the Fair Labor Standards Act that is above the worker's regular rate; and (B) pay above the regular rate that is paid under an agreement made before the work is done if either the agreement sets a standard work time that is at least 40 hours in a 7-day period, or, for employees covered by the Railway Labor Act, the pay is for work beyond scheduled or expected hours or for duty hours that exceed a maximum set by the agreement. The bill takes effect for taxable years beginning after December 31, 2024.

What it means for you#

• If you get overtime pay that matches the bill's definition, you could be able to deduct that overtime from your taxable income for federal tax purposes beginning with tax years after 2024.
• For overtime paid under an agreement, the agreement must be made before the work and must meet the hours conditions in the bill (including a minimum 40-hour standard for a 7-day period, or special rules for workers under the Railway Labor Act).
• The bill applies to overtime paid to individuals and uses the phrase "regular rate" as the baseline for what counts as overtime.

Expenses#

No publicly available information on federal revenue effects, budget costs, or estimates is included in the bill text. No Congressional Budget Office estimate or other cost estimate is included in the provided material.

Proponents' View#

No publicly available information in the bill text describing supporters' arguments or rationale.

Opponents' View#

No publicly available information in the bill text describing opponents' arguments or concerns.