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House Passes Bill to Eliminate Federal Income Tax on Overtime Pay

The measure heads to the Senate for approval with a 2027 sunset date unless lawmakers extend it

Overview

  • The House approved the 'One Big Beautiful Bill Act' including a provision to exempt overtime pay premiums from federal income taxes for over 80 million hourly workers.
  • Workers would claim the full overtime deduction on annual tax returns rather than see immediate changes in paychecks, and the benefit expires after 2027 if not renewed.
  • The Congressional Budget Office estimates the overtime tax break could reduce federal revenue by about $124 billion before its scheduled sunset.
  • Labor groups highlight that overtime eligibility varies by sector, with firefighters requiring 53 hours of work weekly before qualifying.
  • Senate conservatives argue the package lacks sufficient spending cuts, and no standalone overtime exemption bill has yet been introduced in that chamber.