Bill Summary
The "No Tax On Overtime Act of 2025" is a legislative proposal aimed at amending the Internal Revenue Code of 1986. The primary objective of this bill is to exclude overtime compensation from gross income for income tax purposes. Specifically, it seeks to ensure that any earnings an employee receives for overtime work, as defined under the Fair Labor Standards Act of 1938, will not be subject to federal income tax. This change is intended to benefit workers by allowing them to keep more of their earnings from overtime labor. If enacted, the provisions of this bill would apply to overtime payments received after the legislation is signed into law.
Possible Impacts
The proposed "No Tax On Overtime Act of 2025" could have several effects on people, including:
1. **Increased Take-Home Pay for Workers**: By excluding overtime compensation from gross income for tax purposes, workers who earn overtime pay would see an increase in their net income. This means that employees who work beyond their standard hours would have more disposable income, which could improve their financial stability and quality of life.
2. **Incentive for Employers to Offer Overtime**: The legislation could encourage employers to offer more overtime opportunities, knowing that their employees would not be taxed on that additional compensation. This could lead to increased job satisfaction, as workers might appreciate the opportunity to earn extra money without the tax burden, while also helping employers meet fluctuating demand without the need for permanent hires.
3. **Potential Impact on Tax Revenue**: The exclusion of overtime pay from gross income could lead to a decrease in federal income tax revenue. This might necessitate adjustments in government budgets or programs funded by tax revenues. As a result, it could impact public services or lead to discussions about alternative funding mechanisms to maintain government services without the anticipated revenue from overtime taxation.
[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 1046 Introduced in Senate (IS)]
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119th CONGRESS
1st Session
S. 1046
To amend the Internal Revenue Code of 1986 to exclude overtime
compensation from gross income for purposes of the income tax.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
March 13, 2025
Mr. Hawley introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to exclude overtime
compensation from gross income for purposes of the income tax.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``No Tax On Overtime Act of 2025''.
SEC. 2. EXCLUSION OF OVERTIME COMPENSATION FROM GROSS INCOME.
(a) In General.--Part III of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 is amended by inserting after section
139I the following new section:
``SEC. 139J. OVERTIME COMPENSATION.
``Gross income shall not include overtime compensation required
under section 7 of the Fair Labor Standards Act of 1938.''.
(b) Clerical Amendment.--The table of sections for part III of
subchapter B of chapter 1 of such Code is amended by inserting after
the item relating to section 139I the following new item:
``Sec. 139J. Overtime compensation.''.
(c) Effective Date.--The amendments made by this section shall
apply to amounts received after the date of the enactment of this Act.
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