HR 560119th CongressIn Committee

Second Job Tax Relief Act of 2025

Introduced: Jan 20, 2025

Standard Summary

Comprehensive overview in 1-2 paragraphs

The Second Job Tax Relief Act of 2025 would create a new tax provision (IRC Sec. 139J) that allows certain taxpayers to exclude compensation earned from a second job from their gross income for income tax purposes, and to treat that compensation similarly for payroll taxes. The exclusion applies only to "qualifying taxpayers" who designate a primary employer (based on at least 2,080 hours worked for that employer in the year). The amount excluded is phased out as modified adjusted gross income (MAGI) rises, and the exclusion sunsets five years after enactment. The bill also modifies how these excludable wages are handled for Social Security, unemployment, and wage withholding, and requires offsets to trust funds to compensate for the revenue loss. The measure was introduced in the House by Representative Bacon and referred to Ways and Means.

Key Points

1New exclusion for secondary-employment pay: For qualifying taxpayers, compensation from a second job would be excluded from gross income for federal income tax purposes, subject to a phased reduction based on MAGI.
2Eligibility and definition of secondary employment: A taxpayer can designate a primary employer if they were paid on an hourly basis for at least 2,080 hours of work by that employer. Secondary employment compensation is the pay from the other employer(s).
3Phase-out based on MAGI: The amount excluded is reduced as MAGI rises above thresholds: $100,000 for single filers (or $150,000 for married filing jointly). The reduction scales with MAGI relative to a $50,000 base; the exclusion is completely phased out when MAGI reaches the threshold plus $50,000 (i.e., $150,000 for single, $200,000 for MFJ).
4Sunset: The exclusion applies only to amounts earned in taxable years beginning after enactment and ending five years later; the provision would expire five years after enactment.
5Payroll taxes and offset: The bill would treat the excludable secondary-employment compensation as part of payroll taxes (Social Security, unemployment, and wage withholding) in a way that reduces tax revenue. To offset the revenue loss, Congress would appropriate funds to the Social Security and related trust funds to mirror the transfers that would have occurred absent the change.

Impact Areas

Primary group/area affected: Taxpayers who hold a second job and who can designate a primary employer with at least 2,080 hours in the year. These individuals would see a reduction in taxable income from their second-job earnings, subject to MAGI phase-out.Secondary group/area affected: Employers (both primary and secondary) and payroll systems would experience changes in how wages from secondary employment are treated for income tax and payroll taxes; tax compliance and withholding processes would need to accommodate the new exclusion.Additional impacts: The federal government would incur reduced income tax and payroll tax revenues for the five-year window, necessitating offset mechanisms to trust funds (Social Security, Disability Insurance, and Hospital Insurance). There is also increased administrative complexity around designating primary employers and applying the phase-out rules. The 5-year sunset means the policy is temporary and would require reevaluation or renewal by Congress.

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