HB405, titled the Keep Every Extra Penny Act of 2025, would amend the Internal Revenue Code to exclude overtime compensation from gross income for federal income tax purposes. In practical terms, workers would not pay federal income tax on overtime pay that is required under section 7 of the Fair Labor Standards Act of 1938. The bill is narrowly focused on overtime wages and does not alter the underlying rules governing when overtime must be paid under labor law.
The bill would create a new tax exclusion in the Internal Revenue Code, adding a new section 139J and updating the table of contents accordingly. Its effective date would apply to overtime amounts received after enactment, so the change would take effect prospectively rather than retroactively. Because the bill concerns federal income tax treatment, it would affect taxpayers who receive qualifying overtime compensation and would reduce taxable income for those workers.
The available context shows the bill was introduced in the House and referred to the Committee on Ways and Means, with no recorded votes or committee debate provided. As a result, there is no documented floor or committee sentiment in the materials, but the bill’s framing suggests a pro-worker, tax-relief purpose. The title and text indicate an intent to let employees keep more of their overtime earnings.
No specific points of contention are recorded in the provided discussion materials. Potential areas of debate, based on the bill’s subject matter, would likely include the revenue impact on federal tax collections, whether the exclusion should apply to all overtime or only FLSA-required overtime, and whether the policy would disproportionately benefit certain workers or industries. However, these concerns are not reflected in any available transcript or vote history here.
Impact
HB405 would amend federal tax law by creating a new exclusion from gross income for overtime compensation required under the Fair Labor Standards Act. This would lower taxable income for eligible workers and reduce federal income tax liability on qualifying overtime pay, while leaving wage-and-hour overtime requirements unchanged. The bill would also require conforming changes to the Internal Revenue Code’s table of sections and would apply only to amounts received after enactment.
Sentiment
The available materials show no committee transcript, vote tally, or recorded opposition, so there is no formal sentiment history to assess. Based on the bill text and title, the measure is presented as worker-friendly tax relief intended to let employees keep more of their overtime earnings. The absence of recorded debate means support or criticism cannot be confirmed from the provided record.
Contention
No specific contention is documented in the provided materials. If debated, likely issues would include the federal revenue cost of exempting overtime pay from income tax, the fairness of giving a tax preference to overtime earners versus other wage earners, and the administrative challenge of defining qualifying overtime compensation. The bill’s limitation to overtime required under the Fair Labor Standards Act could also raise questions about coverage for workers with different overtime arrangements.