In personal income tax, further providing for definitions and providing for provisions for overtime pay.
Summary
HB1357 would amend Pennsylvania’s Tax Reform Code to create a personal income tax deduction for overtime pay. The bill first expands the definition of “compensation” to expressly include overtime pay and then adds a new section requiring employers to withhold tax on overtime wages while allowing taxpayers to deduct the amount of overtime pay they received when calculating annual taxable income. If the deduction reduces a taxpayer’s liability below zero, the Department of Revenue would issue a refund for the excess amount.
The bill also includes a labor-protection provision stating that an employer may not reduce or deny overtime hours solely because the overtime pay is subject to the deduction, so long as the overtime would otherwise have been available under similar circumstances. A violation would carry a $2,000 fine. The measure applies to taxable years beginning on or after December 31, 2025, and takes effect immediately upon enactment.
Impact
HB1357 would change state personal income tax law by carving overtime pay out of taxable income through a new deduction and related refund mechanism, while also amending the statutory definition of compensation to account for overtime wages. It would affect employees who earn overtime, employers subject to Pennsylvania withholding requirements, and the Department of Revenue, which would need to administer the deduction and any resulting refunds. The bill also creates a new compliance obligation and penalty for employers that retaliate against or limit overtime availability solely because of the tax deduction.
Sentiment
No committee transcript or vote record is available, so there is no documented floor or committee debate to gauge sentiment. Based on the bill’s sponsors and structure, the measure appears intended as a worker-focused tax relief proposal, likely appealing to employees who rely on overtime income. The absence of recorded votes or discussion means there is no formal evidence of support or opposition in the provided materials.
Contention
The main policy tension in HB1357 is between providing tax relief to overtime workers and the administrative and fiscal effects of exempting that income from taxation. Supporters would likely emphasize take-home pay for hourly workers and fairness for employees who work extra hours, while critics may question revenue loss, complexity in payroll and tax administration, and whether the deduction could create uneven treatment between overtime and regular wages. The bill also anticipates a potential employer response by prohibiting reductions in overtime availability, suggesting concern that employers might otherwise alter scheduling or staffing practices to offset the tax change.
In personal income tax, further providing for classes of income; in corporate net income tax, further providing for definitions; in tax credit and tax benefit administration, further providing for definitions; and providing for personal health investment tax credit.
In personal income tax, further providing for classes of income; in corporate net income tax, further providing for definitions; and providing for personal health investment tax credit.