A bill for an act excluding overtime pay from the individual income tax, and including applicability provisions.(See HF 1024.)
Summary
House File 110 would create a new subtraction from Iowa individual income tax for qualifying overtime compensation. Specifically, it allows taxpayers to exclude from taxable income the portion of wages earned at not less than one and one-half times the regular rate of pay, as authorized under federal overtime law. The bill is framed as an income tax change rather than a labor-law change, and it applies only to tax years beginning on or after January 1, 2026.
In practical terms, the bill would reduce state income tax liability for workers who receive overtime pay, while also reducing state revenue collected from those wages. The change would be added to Iowa Code section 422.7, which lists individual income tax subtractions, and would affect taxpayers who work hours eligible for overtime under 29 U.S.C. 207. The bill was later renumbered as HF 1024 after committee action, indicating it advanced in the legislative process in that form.
Impact
The bill would amend Iowa’s individual income tax statutes by adding a new subtraction for overtime compensation to section 422.7 of the Iowa Code. This would lower taxable income for eligible workers beginning with tax years starting January 1, 2026, and would require the Department of Revenue to administer the new exclusion in calculating state income tax. The measure would not change federal overtime rules or employer wage obligations; it only changes how qualifying overtime pay is treated for Iowa tax purposes.
Sentiment
The available voting history suggests strong support in committee: the House Ways and Means Committee reported the bill out unanimously, 24-0. No committee transcript is available here, but the unanimous vote indicates the proposal was broadly acceptable at that stage. The bill’s framing as tax relief for working people likely contributed to its favorable reception.
Contention
No specific objections are documented in the provided materials, and the committee vote shows no recorded opposition. Potential areas of debate, however, would typically include the revenue impact on the state budget, whether the exclusion should apply broadly or only to certain workers, and whether exempting overtime pay creates fairness issues compared with other forms of compensation. Because no transcript is available, it is not possible to identify any member or stakeholder who raised those concerns in this case.
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