Did Trump pass no taxes on overtime?

Did the no tax on overtime pass? Yes. The no tax on overtime bill was included in the One Big Beautiful Bill that President Trump signed into law in July 2025. This new law creates a first-of-its-kind tax exemption for certain overtime pay, effective beginning in tax year 2025.

How does Trump no tax on overtime work?

Despite the “No Tax on Overtime” label, the overtime deduction does not completely eliminate taxes on overtime pay. Some people may still owe federal and/or state income tax on their overtime pay, and payroll taxes still apply to it. The overtime deduction is temporary – it only applies for the 2025 to 2028 tax years.

Has no tax on overtime started?

Yes, No Tax on Overtime was bundled into the sweeping tax act that became law on July 4, 2025. It also included a separate provision called “No Tax on Tips,” which allows certain taxpayers in eligible occupations to deduct up to $25,000 in voluntary tipped income from their federal tax return.

Is the no tax on overtime bill passed 2025?

This new law allows non-exempt hourly employees under the Fair Labor Standards Act (FLSA) to take a federal income tax deduction for the total amount of “qualified overtime compensation” received. Eligible employees can claim the deduction on their federal tax returns starting with the tax year 2025 through 2028.

What changes did Trump make to taxes?

President Donald Trump's "big beautiful bill" includes several tax changes that are effective for 2025. Provisions include permanent extensions of Trump's 2017 tax cuts, along with boosts for the standard deduction and child tax credit.

No tax on overtime now law but there’s a catch

What is the big bill that Trump passed?

The One Big Beautiful Bill Act (OBBBA) or the Big Beautiful Bill (P.L. 119-21), is a U.S. federal statute passed by the 119th United States Congress containing tax and spending policies that form the core of President Donald Trump's second-term agenda. The bill was signed into law by Trump on July 4, 2025.

Which president promised no new taxes?

"Read my lips: no new taxes" is a phrase spoken by American presidential candidate George H. W. Bush at the 1988 Republican National Convention in New Orleans as he accepted the nomination on August 18.

What would happen if Trump tax cuts expire?

If the individual tax cuts expire, taxpayers in all income groups would face higher and more complicated taxes. Machinery and equipment expensing is a key provision that, if allowed to expire, would especially harm capital-intensive industries like manufacturing.

What is the new overtime rule in 2025?

The main "new overtime rule" for 2025 isn't about who gets overtime, but a temporary federal tax break: the "No Tax on Overtime" deduction, effective retroactively from January 1, 2025, through 2028, allowing eligible hourly workers to deduct the premium (extra half) of their overtime pay from federal income tax when filing returns in 2026 and beyond, with limits and employer reporting required. Separately, there's a push for a new FLSA salary threshold for exemption, potentially raising it to around $58,656 annually, expanding overtime eligibility for salaried workers too, although details and finalization can vary. 

What states do not tax overtime pay?

As of late 2025/early 2026, Alabama is the only state with a current, implemented law exempting overtime pay from state income tax (until mid-2025), while a recent federal law (the "One Big Beautiful Bill") allows a federal tax deduction for overtime (and tips) through 2028, impacting state policies, with some states like Michigan adopting similar rules or proposing them, but many others not yet following. 

Why is overtime taxed at 40%?

Overtime isn't taxed at a flat 40%; it's taxed at your normal rate, but a larger chunk is withheld from that check because the extra pay pushes your total income for the pay period higher, potentially into a higher tax withholding bracket, making it seem like a higher rate, though it's usually reconciled later at tax time, and for 2025-2028, a new law lets you deduct some overtime from your taxable income. 

Why is no tax on overtime bad?

No tax on overtime is considered bad policy by many economists because it creates tax inequity, potentially costs the government billions in lost revenue, encourages employers to rely on overtime instead of hiring, and can be exploited by highly paid individuals, ultimately shifting the tax burden and potentially harming public services and future Social Security benefits. It's seen as a loophole that benefits a few while creating complex tax code issues and distorting labor markets, say experts from the Tax Foundation and the Center for Economic and Policy Research, as noted by the Tax Foundation. 

How much tax will I pay if I do overtime?

You pay regular income tax rates on overtime, but new 2025-2028 US law lets you deduct up to $12,500 (or $25k joint) of the extra half of overtime pay from federal income tax when you file, reducing your tax bill, though payroll taxes (FICA) still apply, and you might see higher initial withholding. The deduction lowers your overall taxable income for the year, but your total income (regular + overtime) still determines your marginal tax bracket. 

What is Trump's new tax law in 2025?

The standard deduction increased for 2025 and 2026, and a new temporary “bonus” deduction for adults 65 and older begins in 2025. The child tax credit increased to $2,200 for the 2025 and 2026 tax years; retirement plan contribution limits for IRAs and 401(k)s also increased for 2026.

Are bonuses taxed at 22% or 40%?

Bonuses are usually taxed at a flat 22% federal rate for amounts up to $1 million using the percentage method, but can hit around 40% (or more) due to additional Social Security, Medicare, and state taxes, especially when combined with your normal pay or for larger bonuses over $1 million (which are taxed at 37% on the excess). 

Did Trump pass the Tax Cuts and Jobs Act?

President Donald Trump then signed the bill into law on December 22, 2017.

Will Trump stop taxing overtime?

Yes. The no tax on overtime bill was included in the One Big Beautiful Bill that President Trump signed into law in July 2025. This new law creates a first-of-its-kind tax exemption for certain overtime pay, effective beginning in tax year 2025.

Is no overtime tax bill passed?

Starting January 1, 2025, a designated amount of qualifying overtime pay will be exempt from federal income tax under the One Big Beautiful Bill Act (OBBBA). You can deduct up to $12,500 (for most filers) or $25,000 (Married Filing Jointly) in overtime pay from your taxable income.

Who still pays $7.25 an hour?

Employers in states that haven't set their own higher minimum wage, or have set it at the federal level, still pay $7.25/hour, including states like Alabama, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, New Hampshire, North Carolina, North Dakota, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Wisconsin, and Wyoming, though few workers actually earn this due to local laws or employer choice, as many states have higher rates and local ordinances often mandate more, notes OnPay. 

How much did Trump's 2017 tax cuts cost?

The Congressional Budget Office (CBO) estimated in 2018 that the 2017 law would cost $1.9 trillion over ten years, and recent estimates show that making the law's temporary individual income and estate tax cuts permanent would cost roughly another $4.2 trillion through 2035.

Who will be most affected by the 2025 tax changes?

The 2025 Federal Tax Debate

Much like the 2017 tax law, the new law favors the richest taxpayers. More than 70 percent of the net tax cuts will go to the richest fifth of Americans in 2026, only 10 percent will go to the middle fifth of Americans, and less than 1 percent will go to the poorest fifth.

How much tax do the top 1% pay?

High-Income Taxpayers Paid the Majority of Federal Income Taxes. In 2022, the bottom half of taxpayers earned 11.5 percent of total AGI and paid 3 percent of all federal individual income taxes. The top 1 percent earned 22.4 percent of total AGI and paid 40.4 percent of all federal income taxes.

Do tax cuts actually help the economy?

Tax cuts boost demand by increasing disposable income and by encouraging businesses to hire and invest more. Tax increases do the reverse. These demand effects can be substantial when the economy is weak but smaller when it is operating near capacity.

How did the 91% tax rate work?

The 91% tax rate (from the 1950s/early 60s) was a high marginal rate that applied only to very high incomes (over ~$2M today), not all income, and was significantly reduced by deductions and loopholes, resulting in much lower effective rates (closer to 40-50% for top earners). While the top rate was high, it incentivized complex tax planning, investment in assets (like real estate or business growth) for capital gains, and reduced the incentive to report all income, meaning few paid the full 91% on everything. 

Did President Reagan raise taxes?

So with Reagan's signature, Congress undid a good chunk of the 1981 tax cut by raising taxes a lot in 1982, 1983, 1984 and 1987.