H.R.561 - Overtime Pay Tax Relief Act of 2025 (119th Congress)
Summary
H.R. 561, the "Overtime Pay Tax Relief Act of 2025," proposes an amendment to the Internal Revenue Code of 1986. The bill introduces a tax deduction for overtime compensation, capped at 20% of an individual's other wages from the same employer. This deduction is available to taxpayers with adjusted gross incomes below certain thresholds: $200,000 for married couples filing jointly, $150,000 for heads of household, and $100,000 for other individuals; and it terminates after December 31, 2029.
Expected Effects
The bill aims to provide tax relief to individuals who work overtime. It allows both itemizers and non-itemizers to deduct overtime pay, potentially increasing their disposable income. The modification of withholding tables by the Secretary of the Treasury would reflect this deduction.
Potential Benefits
- Potentially increases disposable income for eligible workers who work overtime.
- Could incentivize workers to take on overtime, boosting productivity.
- Simplifies tax filing for non-itemizers by allowing the deduction.
- Provides targeted tax relief to lower and middle-income individuals.
- May stimulate economic activity through increased consumer spending.
Potential Disadvantages
- The deduction is limited to a specific income bracket, excluding higher-income earners.
- The deduction's sunset provision (December 31, 2029) creates uncertainty for long-term financial planning.
- The complexity of modifying withholding tables could create administrative burdens.
- Potential for increased tax fraud or errors related to overtime compensation claims.
- The bill could disproportionately benefit industries that rely heavily on overtime labor.
Constitutional Alignment
The bill aligns with the general welfare clause of the Constitution (Preamble). Specifically, it aims to promote the economic well-being of a segment of the population through tax relief. Article I, Section 8, Clause 1 grants Congress the power to lay and collect taxes, duties, imposts, and excises to pay the debts and provide for the common defense and general welfare of the United States.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).