Congress gives overtime workers a federal tax break on extra pay
H.R. 4740 — No Tax on Overtime for All Workers Act · Filed by Emilia Sykes (D-OH) · 1 cosponsor · Introduced Jul 23, 2025 · Referred to committee
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What it does
This bill allows workers to deduct overtime compensation from their taxable income. Specifically, it lets employees exclude from federal income tax any overtime pay they receive above their regular hourly rate — either overtime required by federal law (Fair Labor Standards Act) or overtime paid under a union contract or individual agreement at 1.5× the regular rate for hours over 40 per week.
Why we flagged it
The bill's sole operative mechanism is a tax deduction for overtime compensation paid to employees. It is a straightforward tax relief measure targeting working people, not a regulatory or appropriations instrument.
What the text implies
- The deduction applies retroactively to taxable years beginning after December 31, 2024, meaning workers may claim it on 2025 tax returns and beyond, creating a multi-year revenue cost to the federal government.
- The bill does not cap the deduction or phase it out by income level, so high-earning workers with substantial overtime (e.g., executives, senior professionals) receive the same tax benefit as lower-wage workers.
- The deduction may incentivize employers to structure compensation as overtime rather than salary, since the overtime portion becomes tax-deductible to the employee (though the employer's payroll tax obligations remain unchanged).
- Workers in states with their own income taxes will still owe state tax on overtime compensation unless those states conform their tax codes to the federal change.
Section numbers refer to the bill text the analysis read — linked under Primary records below.
Who it affects
Ordinary workers who earn overtime pay will owe less federal income tax, directly increasing their take-home pay. The benefit flows to employees, not employers, and applies broadly to any worker earning overtime under federal law or contract.
Who stands to gain
- individual workers earning overtime compensation
Named in the bill
Internal Revenue Code of 1986, Fair Labor Standards Act of 1938, Section 225(c)(1) IRC, Section 7 FLSA
Where it stands
1 cosponsor: 1 Democrats.
- Jul 23, 2025 — Introduced · Congress.gov: “Introduced in House”
- Jul 23, 2025 — Referred to House Committee on Ways and Means · Congress.gov: “Referred to the House Committee on Ways and Means”
Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.
Money around this bill
1 lobbying clients named this bill on 1 disclosure filings across 1 quarter, Jun 2026 to Jun 2026. Those filings disclosed $715,000 in lobbying spend. A filing names 43 bills on average, so that figure is what each filing reported, not a share belonging to this bill.
More lobbying clients named this bill than 0% of bills with at least one filing.
Emilia Sykes, the sponsor, reported $1,064,312 in PAC receipts in the 2026 cycle.
- International Association of Machinists and Aerospace Workers — $715,000 on 1 filing
Lobbying Disclosure Act filings through Jul 21, 2026. A filing shows who paid to lobby on a bill it names, not what changed.
How this was measured
Analysis — Quorum's AI read the bill text published by Congress.gov (1,326 characters) on May 21, 2026. Section numbers in the findings refer to that text, linked below; transparency and hidden-provision scores are compared against the median of 16,222 analysed bills.
Status and sponsors — Congress.gov's bill record — actions, committee referrals and cosponsors — loaded nightly. The timeline shows status changes, not every procedural action.
Money — Senate Lobbying Disclosure Act filings whose specific-issue field names this bill for quarters ending Jun 2026 to Jun 2026. A filing's amount is reported whole beside the median number of bills a filing names; it is never divided across them. PAC receipts are FEC-reported contributions to the sponsor's candidate committee in the 2026 cycle.
As of — lobbying records through Jul 21, 2026 · page rendered 2026-10-20.
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