New York Assembly Bill A08965

New York 2025-2026 Regular Session

• Introduced: 8/13/25
• Refer: 8/13/25
• Refer: 1/7/26

Caption

Reduces federal adjusted gross income by the amount of overtime compensation earned by an individual in certain circumstances; defines overtime compensation.

Summary

This bill amends New York’s Tax Law to create a new subtraction from federal adjusted gross income for certain overtime compensation earned by an individual. In general, the bill would allow taxpayers to exclude overtime pay from New York taxable income to the extent that the compensation is included in federal gross income. It defines overtime compensation as wages earned for time worked beyond an individual’s normal scheduled hours, and it also incorporates a more specific federal-style definition for certain qualified overtime compensation arrangements. The bill’s definition is broad enough to cover ordinary overtime pay and also addresses special employment arrangements, including agreements with labor organizations and certain workers covered by the Railway Labor Act, such as crewmembers, flight crewmembers, and rail operating craft employees. The subtraction would apply beginning with taxable years starting on or after January 1, 2026, and the act would take effect immediately upon enactment.

Impact

If enacted, the bill would reduce New York taxable income for eligible workers by exempting qualifying overtime compensation from the state income tax base. This would amend section 612 of the Tax Law, affecting individual income tax calculations and potentially lowering tax liability for employees who regularly earn overtime, including workers in industries with scheduled overtime, union-negotiated overtime, and certain transportation workers. The measure would also create a new state tax preference that could reduce state revenue, depending on how much overtime income taxpayers claim under the subtraction.

Sentiment

The bill text and available context suggest a generally favorable policy intent toward workers who earn overtime, with the measure framed as tax relief for earned wages. There is no recorded committee transcript or vote history in the provided materials, so there is no documented opposition or support from debate or roll call data. The sponsorship and amendment history indicate the bill advanced through committee procedures, but the available record does not show a final disposition.

Contention

The main points of potential contention are fiscal and definitional. Opponents could question the revenue loss from excluding overtime pay from taxation, while supporters would likely emphasize relief for working taxpayers and the fairness of not taxing extra hours worked. Another possible issue is the scope of the exemption: the bill’s incorporation of federal qualified overtime concepts and special rules for Railway Labor Act-covered employees may raise questions about which workers qualify and how employers and the Department of Taxation and Finance would administer the subtraction.