No Tax on Overtime Details Revealed as GOP Tax Bill Moves Forward

Newsweek

13-05-2025

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Donald Trump's campaign promise to eliminate taxes on overtime pay could finally be fulfilled as part of a sweeping bill presented by House Republicans on Monday and set to be taken on by the Ways and Means Committee on Tuesday.
The plan, dubbed "The One Big, Beautiful Bill," would also extend some of the tax cuts Trump signed in 2017 which are set to expire at the end of this year.
Why It Matters
During his 2024 presidential campaign, Trump proposed several tax cuts for Americans, including exemptions for income earned from overtime work, tipped income, and Social Security benefits.
The president has claimed that eliminating the tax on overtime work would be "an incentive to work" and help companies attract employees, but some economists have expressed concern over the loss in revenues for the federal government and the disrupting impact on the labor market.
What To Know
Under the Fair Labor Standard Act (FLSA), Americans who work beyond their typical 40-hour workweek are entitled to receive at least 1.5 times their standard pay rates for every extra hour of labor. This extra pay is currently subject to federal income tax—something that Trump would like to change.
According to the proposed tax bill unveiled by House Republicans on Monday, which comprises almost 400 pages, the federal income tax on overtime pay could be temporarily eliminated between the tax years 2025 through 2028.
The tax exemption for overtime pay, if enacted, would only apply to income taxes, and not payroll taxes, and would be subject to income restrictions. A work-eligible Social Security number would be required to claim the deduction.
Under a bill introduced by Sens. Roger Marshall (R-Kansas) and Tommy Tuberville (R-Alabama) on May 6, the Overtime Wages Tax Relief Act, individual workers would be able to deduct up to $10,000 in overtime pay, while married couples would be able to deduct up to $20,000. The break would phase out high-earners once individual adjusted gross income reaches $100,000 or a married couple's income reaches $200,000.
A view of the U.S. Capitol building on May 7, 2025, in Washington, D.C.
A view of the U.S. Capitol building on May 7, 2025, in Washington, D.C.
OLIVER CONTRERAS/AFP via Getty Images
Several economists and policymakers have warned that such tax cuts as the ones promised by Trump during his presidential campaign could have a negative impact on the country's economy, inflating the U.S. debt and shrinking the federal government's revenues.
House Republicans have promised to find some $1.5 trillion-$2 trillion in cost savings in other areas to offset the cost of the tax cuts they are trying to enact, while Trump has said that tariffs would cover the cost of the tax cuts.
The proposed bill also raises the debt limit by $4 trillion, a move that Congress would need to approve before going into recess in August in order to prevent default. The country currently has a debt of over $36 trillion.
The Joint Committee on Taxation (JCT) estimated that the proposed House GOP plan could cost $5 trillion over ten years.
What People Are Saying
Ways and Means Chairman Jason Smith said in a press release: "This bill delivers on what Americans voted for with President Trump's promise to put America First—with tax policies that reward hard work, bring jobs back home, increase opportunity, and rebuild the economy for the working class."
He added: "It puts the interests of low-income, working families ahead of the wealthy by expanding tax relief to those who need it the most—including the President's priorities of no tax on tips and overtime pay and additional relief for America's seniors. Small businesses and family farmers will benefit from the certainty provided so they can invest in their futures and grow jobs."
President Donald Trump wrote on X: "We will work together on any and all outstanding issues, but there shouldn't be many—The Bill is GREAT. We have no alternative, WE MUST WIN!"
Sen. Roger Marshall said: "Everything is possible under President Trump. We have to get his 'One, Big, Beautiful Bill' across the floor, and we have to prioritize President Trump's priorities, which include this no-tax-on-overtime legislation."
House Speaker Mike Johnson told Fox News: "We can put it all together, one big up-or-down vote, which can save the country, quite literally, because there are so many elements to it."
Treasury Secretary Scott Bessent recently told reporters: "We've got three legs to the president's economic agenda—trade, tax, and deregulation—and we hope that we can have this tax portion done by Fourth of July."
What Happens Next
To become reality, the measure to temporarily eliminate the federal income tax on overtime work must be approved by both the House and the Senate and then signed into law by Trump.
If passed by the House, where the Republican Party has a slim majority, the Senate could use the budget reconciliation process to pass the bill with a simple majority of 51 votes, avoiding the requirement for 60 votes and the filibuster.
The Trump administration hopes the plan will be enacted by July 4.