In personal income tax, providing for tax paid on overtime wages.
Summary
HB1586 would amend Pennsylvania’s Tax Reform Code to create a personal income tax credit for taxes paid on overtime wages. The credit would equal 100% of the state income tax attributable to overtime pay, be fully refundable, and be claimed using information from the employer’s wage statement. The Department of Revenue would be required to build the credit into the standard PA-40 return, and taxpayers would need to submit documentation showing the amount of overtime wages and related tax paid.
The bill defines overtime wages by reference to Pennsylvania’s Minimum Wage Act, meaning wages paid at least one and one-half times the employee’s regular rate for overtime hours. It would apply to taxable years beginning after December 31, 2025, and take effect immediately upon enactment. In practical terms, the measure would reduce or eliminate state personal income tax on overtime earnings for eligible workers and create a new refundable credit administration process within the Department of Revenue.
Impact
HB1586 would amend the Tax Reform Code of 1971 by adding a new section to the personal income tax article. It would affect individual taxpayers who earn overtime wages, the Department of Revenue, and employers that issue the wage statements used to verify the credit. Because the credit is fully refundable, it could result in state tax refunds even for taxpayers with little or no income tax liability, and it would require changes to tax filing forms and administration. The bill also interacts with the Minimum Wage Act’s overtime definition and with existing tax forgiveness provisions under section 304.
Sentiment
No committee transcript or vote history was provided, so there is no recorded debate or roll-call evidence to gauge legislative sentiment. Based on the bill text alone, the measure appears designed as a tax relief proposal for workers earning overtime pay, suggesting a pro-worker and pro-tax-cut framing. However, without discussion or votes, support or opposition cannot be assessed from the available record.
Contention
The main policy questions likely concern the fiscal cost to the Commonwealth, the administrative burden of verifying overtime wages, and whether a refundable credit is the appropriate mechanism for tax relief. Potential points of contention also include the interaction with existing tax forgiveness rules, the need for employers to supply documentation, and whether the credit should apply broadly to all overtime income or be limited in some way. No specific opponents or supporters are identified in the available materials.
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.
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.