House Bill 11 would create new North Carolina income tax deductions for three categories of worker compensation: overtime pay, tips that are required to be reported to an employer, and bonus pay up to $2,500. The bill amends the state’s individual income tax deduction statute, G.S. 105-153.5(b), to allow taxpayers to subtract these amounts from adjusted gross income when calculating North Carolina taxable income. For married couples filing jointly, each spouse could qualify separately for the deductions if they individually received qualifying income.
The bill defines bonus pay narrowly as supplemental wages paid as a cash award in recognition of outstanding work, suggestions, or similar workplace dedication, and excludes tips from that bonus-pay category. Taxpayers would need to provide any information required by the Secretary of Revenue to claim the deductions. The act would apply to taxable years beginning on or after January 1, 2025.
HB11 would reduce taxable income for eligible workers and therefore could lower state income tax liability for employees who earn overtime, tips, or qualifying bonuses. It would amend North Carolina’s personal income tax code by adding three new deductions in G.S. 105-153.5(b), affecting taxpayers, employers that report tips or payroll information, and the Department of Revenue, which would administer and verify the deductions. The bill is prospective only and would apply starting with tax year 2025.
The bill’s title and structure suggest a broadly pro-worker, tax-relief approach aimed at increasing take-home pay for employees who rely on overtime, gratuities, and performance bonuses. No committee transcripts or recorded votes were provided, so there is no direct evidence of debate, support, or opposition in the available materials. The bill’s referral to the House Finance Committee indicates it was still under fiscal review as of the last action shown.
The main likely points of contention are fiscal and administrative rather than conceptual. Supporters would likely emphasize relief for working families and employees in tipped or hourly occupations, while critics may question the revenue loss to the state and whether the deductions create uneven treatment among taxpayers. The bonus-pay cap, the requirement that tips be reportable to an employer, and the need for taxpayers to provide information required by the Secretary could also raise questions about eligibility, compliance, and enforcement.