Congress gives overtime workers a tax break—but only up to $100K income
H.R. 3118 — No Tax on Overtime Act · Filed by Nathaniel Moran (R-TX) · Introduced Apr 30, 2025 · Referred to committee
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What it does
This bill allows workers to deduct overtime pay from their federal income taxes, up to 300 hours per year, with the deduction phasing out for higher earners (above $100,000 individual / $200,000 joint income). The deduction is available to all workers, not just those who itemize deductions, and employers must report overtime compensation on W-2 forms.
Why we flagged it
The bill's primary function is to reduce federal income tax liability for workers earning overtime compensation. It is a targeted tax deduction, not a regulatory change or appropriation.
What the text implies
- The deduction reduces federal tax revenue, shifting the tax burden to non-overtime earners or requiring offsetting revenue measures elsewhere.
- The 300-hour cap may incentivize employers to structure compensation differently (e.g., bonuses instead of overtime) to avoid wage-and-hour compliance scrutiny.
The full analysis lists 4 implications of this text.
Who stands to gain
workers earning overtime compensation; middle-income households