Sponsors (4)
Introduced May 6, 2025 by Roger Wayne Marshall · Last progress May 6, 2025
The bill offers targeted tax relief and easier claiming for overtime pay that benefits many lower- and middle-income workers (including non-itemizers) while improving reporting, but it reduces federal revenue, raises employer compliance costs, and leaves ambiguous eligibility rules that may require further IRS guidance or disputes.
Workers (especially lower- and middle-income taxpayers) can reduce taxable income by up to $10,000 per person ($20,000 joint) for overtime pay, lowering federal income tax liability and increasing after-tax income.
The deduction is available to non-itemizers and withholding tables must be adjusted so take-home pay reflects the deduction, meaning many workers who don't itemize will still get immediate tax relief through higher take-home pay rather than waiting for refunds.
Standardized employer W-2 reporting of overtime pay improves transparency and simplifies claiming the overtime deduction for taxpayers and tax preparers.
The deduction reduces federal revenue, which could increase budget deficits or create pressure for future tax increases or spending cuts.
Employers—especially small businesses—must track and report overtime in a new W-2 field and adjust payroll systems, creating additional compliance costs and administrative burden.
Higher-earning households above the MAGI phaseouts receive reduced or no benefit, so the relief is limited and concentrated among lower- and middle-income workers.
Based on analysis of 2 sections of legislative text.
Creates an above-the-line deduction allowing individuals to deduct up to $10,000 ($20,000 joint) of qualifying overtime pay per year, phased out at higher incomes.
Creates a new above-the-line tax deduction that lets individual taxpayers deduct up to $10,000 of qualifying overtime pay per year ($20,000 for married joint returns). The deduction phases out for higher earners and requires employers to report total overtime pay on Form W-2; Treasury must issue implementing regulations and adjust withholding rules. Effective for taxable years beginning after December 31, 2025.