New tax break for overtime workers—but only if you earn under $100k
H.R. 561 — Overtime Pay Tax Relief Act of 2025 · Filed by Don Bacon (R-NE) · Introduced Jan 20, 2025 · Referred to committee
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What it does
This bill creates a new federal income tax deduction for overtime pay. Workers earning overtime under the Fair Labor Standards Act can deduct up to 20% of their regular wages from that employer from their taxable income, but only if their adjusted gross income is below $100,000–$200,000 (depending on filing status). The deduction expires after 2029.
Why we flagged it
The bill's sole operative mechanism is a targeted income tax deduction for overtime-earning workers below specified AGI thresholds. It is straightforward tax relief legislation with no hidden riders or complex cross-purposes.
What the text implies
- The 20% cap on deductible overtime may incentivize employers to structure compensation to stay within the cap, potentially affecting how overtime is calculated or paid.
- The deduction sunsets after 2029, creating a cliff where workers lose the benefit; renewal would require future legislative action.
- The AGI phase-out means workers earning overtime in high-cost-of-living areas or with secondary income may lose eligibility despite relying on overtime pay.
Section numbers refer to the bill text the analysis read — linked under Primary records below.
Who it affects
Ordinary workers who earn overtime pay and fall below the income thresholds receive a direct tax reduction, lowering their federal tax burden. The benefit is narrowly targeted to overtime-earning workers (typically lower- and middle-income earners) and phases out at higher incomes, concentrating the benefit on those most likely to depend on overtime compensation.
Who stands to gain
- workers earning overtime compensation under FLSA
- lower- and middle-income households
Named in the bill
Internal Revenue Code of 1986, Fair Labor Standards Act of 1938, Secretary of the Treasury, House Committee on Ways and Means
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.
How this was measured
Analysis — Quorum's AI read the bill text published by Congress.gov (3,059 characters) on Sep 18, 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.
As of — page rendered 2026-10-20.
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