The proposed amendments would specifically allow individuals to claim a deduction for overtime compensation received, which is recognized as a benefit under the Fair Labor Standards Act of 1938. The bill sets adjusted gross income limits to qualify for the deduction, capping eligibility for married couples at $200,000, heads of households at $150,000, and single filers at $100,000. This limitation seeks to ensure that the tax relief is targeted primarily towards lower and middle-income workers who are more likely to rely on overtime for their financial stability.
Summary
House Bill 9799, known as the Overtime Pay Tax Relief Act of 2024, has been introduced to amend the Internal Revenue Code of 1986 with the intent of providing a tax deduction for certain overtime payments. This bill aims to alleviate the tax burden on employees who receive overtime compensation, allowing them to deduct an amount equal to up to 20 percent of their other wages from the same employer during the taxable year. The objective is to improve the financial well-being of workers who are legally required to receive these overtime wages under existing labor law.
Contention
While supporters of HB 9799 argue that it will provide necessary tax relief for hardworking individuals and acknowledge the financial strain posed by extended work hours, there may be concerns about the implications of the income thresholds set by the bill. Critics could argue that the restrictions may inadvertently exclude a significant number of workers who, while they may earn overtime, do not qualify for the deduction due to their income level. The bill's impacts on overall tax revenues and the adjustments to existing withholding procedures are also potential areas of contention that require further scrutiny.
Overtime Pay Tax Relief Act of 2025This bill allows a tax deduction for overtime compensation received by an individual, subject to income limitations, through 2029. The amount of the deduction may not exceed 20% of the individual’s regular wages from the same employer. Further, the deduction is not allowed for an individual with adjusted gross income exceeding $100,000 (or $150,000 for a head of the household and $200,000 for a married couple filing a joint return).