No tax on overtime remains in Senate megabill: How would it work?
(NEXSTAR) — After an overnight marathon, the Senate on Tuesday passed a major package to advance priorities central to President Donald Trump's agenda with the help of a tie-breaking vote from Vice President JD Vance.
The legislation has faced multiple changes since it passed in the House in May, like the removal of a provision that would bar states from regulating artificial intelligence and tweaks to Medicaid.
Among the parts of the legislation that have remained from the House version through the Senate vote-a-rama is a Trump campaign promise: no tax on overtime pay.
While the move wouldn't immediately make your paycheck feel larger (though it may be larger this year, even without a raise), removing taxes on overtime pay could lead to a bigger refund.
In both versions of Trump's "big, beautiful bill," taxes on overtime would be treated as a deduction.
In the House bill, the tax break would remove income taxes on the overtime pay premium for over 80 million hourly workers. For qualifying overtime, this would be a temporary full deduction of the overtime pay employees receive, ending after 2027. In the Senate's bill, however, overtime pay would be deductible up to $12,500 or $25,000 for joint filers through 2028, The Hill reported.
The bill now heads back to the House where it could face some changes, but it's unclear if this section will be altered.
If it remains a tax deduction, eligible workers would claim the overtime pay on their taxes during the following year. The same would apply to deductions for taxes on tips and car loan interest, other aspects within the massive bill.
Qualifying could vary based on the industry you work in.
Firefighters, for example, have to work 53 hours a week before qualifying for overtime, Edward Kelly, general president for the International Association of Fire Fighters, said in a statement obtained by NBC News.
The Tax Foundation said last year that exempting overtime from income tax, then a campaign promise of Trump's, could encourage more employees to want to work overtime hours. It could, similarly, cause employers to "be more aggressive to contain overtime requests as total labor costs rise." The Congressional Budget Office warned that exempting overtime pay from income taxes could lead to $124 billion in lost tax revenue.
It's unclear how fast the bill could move through the House, but GOP leaders there have scheduled a Wednesday vote with the promise of putting it on Trump's desk by his July Fourth deadline.
It's a pivotal moment for the president and his party, as they have been consumed by the now 887-page “One Big Beautiful Bill Act,” which was its formal title before Democrats filed an amendment to strip out the name. Republicans are investing their political capital in delivering on their sweep of power in Washington.
Trump acknowledged it’s “very complicated stuff” as he departed the White House for Florida.
“I don’t want to go too crazy with cuts," he said. "I don’t like cuts.”
The Associated Press contributed to this report.