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).
If enacted, HB 561 would amend the Internal Revenue Code to establish clear guidelines for claiming such deductions. The introduction of this deduction could lead to changes in tax filings for eligible individuals and may incentivize companies to offer more overtime opportunities. Moreover, the bill sets income thresholds that restrict eligibility, allowing only those below $200,000 for joint filers, $150,000 for heads of household, and $100,000 for individual taxpayers to benefit from this tax relief.
House Bill 561, titled the "Overtime Pay Tax Relief Act of 2025", aims to introduce a tax deduction for certain overtime compensation received by employees. This bill proposes that individuals can claim a deduction equivalent to 20% of their overtime pay, as long as the overtime compensation does not exceed this threshold in relation to their regular wages. The legislation seeks to alleviate financial burdens on workers who regularly earn overtime pay while offering incentives to employers to maintain fair compensation practices.
Notably, there may be points of contention surrounding the bill regarding its fiscal implications and the potential for it to disproportionately benefit higher-income earners who may more frequently exceed the defined limits. Critics may argue that the income caps do not adequately reflect the needs of lower-income workers who rely significantly on overtime pay. Additionally, concerns may arise about how the bill fits within the broader context of labor regulations and whether it provides enough support for employees affected by fluctuating work hours due to shifts in economic conditions.