SB1606, the “Overtime Wages Tax Relief Act,” would amend the Internal Revenue Code to create a new federal income tax deduction for certain overtime compensation received by individuals. The deduction would generally equal up to $10,000 of overtime pay per taxpayer per year, or up to $20,000 for joint filers, and would phase down for higher-income taxpayers once modified adjusted gross income exceeds $100,000 for single filers or $200,000 for joint filers. The bill defines eligible overtime compensation as pay at least 1.5 times the regular rate for hours worked beyond the applicable overtime threshold under the Fair Labor Standards Act or under a qualifying collective bargaining or preexisting agreement.
Impact
If enacted, the bill would change federal tax law by adding a new above-the-line-style deduction for overtime compensation and by making conforming amendments so the deduction is available to both itemizers and non-itemizers. It would also exclude the deduction from certain itemized deduction limitations, require employers to report total overtime compensation on wage statements, and direct the Treasury Department to adjust withholding tables and procedures. The amendments would apply to taxable years beginning after December 31, 2025, affecting taxpayers who earn qualifying overtime pay and employers responsible for payroll reporting and withholding.
Sentiment
The available record shows no committee transcript or vote history, so there is no documented debate or recorded sentiment from floor or committee consideration. Based on the bill’s title and structure, the measure appears intended as tax relief for workers who earn overtime, suggesting a pro-worker, pro-tax-cut framing. However, without discussion or votes, broader support or opposition cannot be determined from the provided materials.
Contention
No specific points of contention are documented in the supplied context because there are no committee transcripts or votes. Potential areas of debate, based on the text alone, would likely include the revenue cost of the deduction, whether the benefit is targeted appropriately, the income-based phaseout, and the administrative burden of new reporting and withholding requirements for employers and the Treasury Department. The bill’s treatment of overtime under collective bargaining agreements may also be relevant to labor and employer stakeholders.
Overtime Pay Tax Relief Act of 2025This bill allows a tax deduction for overtime compensation received by an individual, subject to income limitations, through 2029. The amount of the deduction may not exceed 20% of the individual’s regular wages from the same employer. Further, the deduction is not allowed for an individual with adjusted gross income exceeding $100,000 (or $150,000 for a head of the household and $200,000 for a married couple filing a joint return).