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Creates an above-the-line deduction for qualifying overtime pay up to $10,000 ($20,000 joint) with a MAGI-based phaseout.
Official title: Amend the Internal Revenue Code of 1986 to establish a deduction for certain overtime payments.
Introduced May 6, 2025 by Roger Wayne Marshall · Last progress May 6, 2025
The bill gives targeted tax relief and simpler claiming for workers paid overtime while improving reporting, but it reduces federal revenue and imposes new compliance and definitional burdens on employers and could create eligibility disputes.
Overtime workers (and their families) can exclude up to $10,000 ($20,000 married filing jointly) of overtime pay from taxable income, directly lowering federal income tax liability.
Employees who do not itemize can still claim the overtime deduction, expanding tax relief to many workers who use the standard deduction.
Adjusting withholding tables so take-home pay reflects the deduction reduces overwithholding and increases workers' immediate net pay for eligible employees.
The deduction reduces federal revenue, which could increase budget deficits or create pressure for future tax increases or spending cuts that affect all taxpayers.
Employers—especially small businesses—must track and report overtime in a new W-2 field, raising payroll compliance costs and administrative burden.
Households with higher modified adjusted gross income will see reduced or no benefit because of MAGI phaseouts, so relief is limited to lower- and middle-income earners.
Based on analysis of 2 sections of legislative text.
Creates a new above-the-line tax deduction that lets eligible taxpayers subtract up to $10,000 of qualifying overtime pay ($20,000 for joint filers) from income each year, phasing out at higher incomes. It defines qualifying overtime, requires Treasury rulemaking and withholding/reporting changes (including a new W-2 reporting line), and applies to tax years beginning after December 31, 2025.