No Tax on Overtime for All Workers Act
This bill, titled the No Tax on Overtime for All Workers Act, would amend the Internal Revenue Code to create a deduction for what it calls “qualified overtime compensation.” The definition covers two main categories: (A) overtime pay required by the Fair Labor Standards Act (FLSA) for work in excess of the regular rate; and (B) other compensation that exceeds the regular rate under an agreement with a single employer, with specific hour-and-period conditions (such as a standard of 40+ hours in a specified period) or, for rail/railway workers, hours beyond scheduled/maximums under the Railway Labor Act. The amendment would apply to taxable years beginning after December 31, 2024. In short, the bill would allow certain overtime pay to be treated as a deductible amount, potentially lowering the tax liability for workers who receive qualifying overtime compensation.
Key Points
- 1Defines “qualified overtime compensation” to include (A) FLSA-required overtime above the regular rate, and (B) overtime above the regular rate under a pre-work agreement with a single employer, with specific conditions tied to hours and periods (including a 40-hour minimum for a 7-day period).
- 2For rail and rail-related workers, includes overtime beyond scheduled/anticipated hours or beyond a maximum number of hours as determined by an agreement under the Railway Labor Act.
- 3Applies to taxable years beginning after December 31, 2024.
- 4The mechanism centers on creating a tax deduction for the amount of “qualified overtime compensation,” effectively reducing taxable income for those amounts.
- 5The bill’s short title signals broad intent to relieve taxes on overtime pay for workers, with targeted coverage for workers subject to FLSA and RL Act provisions.