New tax deduction for bonuses — but only if you earn under $100K–$200K

What it does

This bill creates a new federal income tax deduction for bonuses received by working people. Individuals earning below $100,000–$200,000 (depending on filing status) can deduct up to 15% of their bonus income from their taxable income, but only if the bonus does not exceed 15% of their regular wages from the same employer. The deduction expires on December 31, 2029.

Why we flagged it

The bill's sole operative mechanism is a new tax deduction for bonus income, capped at 15% of non-bonus wages and limited to taxpayers below specified income thresholds. It is a straightforward tax-code amendment with no riders or hidden provisions.

What the text implies

• The deduction is available only to non-itemizers and does not interact with the standard deduction, meaning it functions as an above-the-line deduction — a more valuable tax benefit than a typical itemized deduction.
• The 15% cap on bonus deduction relative to non-bonus wages may incentivize employers to structure compensation as bonuses rather than base wages, potentially affecting payroll tax withholding and Social Security benefit calculations.
• The sunset on December 31, 2029 creates a temporary tax benefit; workers receiving bonuses after that date lose the deduction unless Congress extends it, creating legislative uncertainty.
• The bill requires Treasury to modify withholding tables under IRC §3402(a), which may create administrative complexity in payroll systems if employers must track bonus-to-wage ratios for withholding purposes.

Section numbers refer to the bill text the analysis read — linked under Primary records below.

Who it affects

The deduction directly reduces federal income tax liability for working-class and middle-class individuals receiving bonuses, provided they stay below the income thresholds ($100,000–$200,000). The benefit is narrowly targeted to bonus income and phases out for higher earners, making it a progressive tax relief measure for ordinary workers.

Who stands to gain

• Individual workers receiving bonuses below income thresholds
• Employers offering bonus compensation (potential payroll administration cost)

Named in the bill

Internal Revenue Code of 1986, IRC §224 (new bonus deduction), IRC §63(b) (standard deduction), IRC §67(b) (itemized deduction limitations), IRC §68(c) (overall limitation on itemized deductions), IRC §3402(a) (withholding procedures), U.S. Department of the Treasury

Where it stands

• Jan 20, 2025 — Introduced · Congress.gov: “Introduced in House”
• Jan 20, 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.