Working Class Bonus Tax Relief Act of 2025

The Working Class Bonus Tax Relief Act of 2025 adds a new deduction for individuals who receive bonuses from their employer. Specifically, taxpayers can deduct an amount equal to up to 15 percent of their non-bonus wages earned from the same employer in the tax year, effectively subsidizing portions of bonus compensation. The deduction is limited by income: it phases out for higher earners (married filing jointly $200,000; head of household $150,000; all others $100,000). The deduction expires after December 31, 2029. The bill also makes conforming changes to allow this deduction for non-itemizers (standard deduction filers) and removes it from certain limitations that apply to itemized deductions, while requiring the Treasury to adjust withholding tables to reflect the new deduction. The changes would apply to bonuses received after the bill’s enactment. In short, the bill is designed to reduce the after-tax cost of bonuses for lower- and middle-income workers by creating a dedicated deduction tied to the amount of non-bonus wages, with coverage extended to all filers (including non-itemizers) but phased out for higher-income households and set to expire in 2029.