No tax on overtime: Senate GOP's bill could limit proposed tax break
Broadly speaking, the committee's version of the budget bill would make permanent many of the core elements of the 2017 tax cuts while scaling back additional cuts from the House's version, The Hill explained Monday.
Among the provisions outlined by Senate Republicans is one targeting taxes on overtime pay.
In the House bill, the tax break would remove income taxes on the overtime pay premium for over 80 million hourly workers. For qualifying overtime, this would be a temporary full deduction of the overtime pay employees receive, ending after 2027.
No taxes on overtime pay: What to know about tax break in GOP budget bill
Under the current version of the Senate's bill, however, overtime pay would be deductible up to $12,500 or $25,000 for joint filers through 2028, The Hill reports. Tax breaks on tipping and car loan interest would also be capped.
A scaled-back take on the 'One Big Beautiful Bill' isn't much of a surprise; some Senate Republicans had expressed frustration over the legislation, saying it needed deeper cuts.
It's worth noting that, if the no-tax-on-overtime provision remains in the bill, it would not give way to a larger paycheck after working extra hours. Instead, because it is a deduction, employees would claim the overtime pay on their taxes during the following year.
Qualifying for overtime pay may even be difficult, depending on an employee's work industry.
Firefighters, for example, have to work 53 hours a week before qualifying for overtime, Edward Kelly, general president for the International Association of Fire Fighters, said in a statement obtained by NBC News last month.
The Tax Foundation said last year that exempting overtime from income tax, then a campaign promise of Trump's, could encourage more employees to want to work overtime hours. It could, similarly, cause employers to 'be more aggressive to contain overtime requests as total labor costs rise.' The Congressional Budget Office warned that exempting overtime pay from income taxes could lead to $124 billion in lost tax revenue.
Bill could make federal minimum wage $15: The states paying less than that
It's too soon to say how fast the bill could pass in the Senate, and what tweaks could be made.
Trump's big bill is the centerpiece of his domestic policy agenda, a hodgepodge of GOP priorities all rolled into what he calls the 'beautiful bill' that Republicans are trying to swiftly pass over unified opposition from Democrats — a tall order for the slow-moving Senate.
Fundamental to the package is the extension of some $4.5 trillion in tax breaks approved during Trump's first term, in 2017, that are expiring this year if Congress fails to act. There are also new ones, including no taxes on tips, as well as more than $1 trillion in program cuts.
After the House passed its version, the nonpartisan Congressional Budget Office estimated the bill would add $2.4 trillion to the nation's deficits over the decade, and leave 10.9 million more people without health insurance, due largely to the proposed new work requirements and other changes.
The Associated Press contributed to this report.
Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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