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.
The overtime deduction allows eligible workers to subtract up to $12,500 of overtime pay from their federal taxable income (up to $25,000 for married couples filing a joint return). However, the deduction is gradually reduced once your modified adjusted gross income (MAGI) hits a certain amount.
No Tax on Overtime is a provision that was included in a larger tax reform bill that passed in July 2025. It allows certain workers to deduct up to $12,500 in qualified overtime compensation from their taxable income on their federal income tax return. Joint filers can deduct up to $25,000.
April 10, 2025, the House adopted the Senate's amended version of the budget resolution, which allows $5.3 trillion in deficit-financed tax cuts (the combination of $3.8 trillion of tax cuts assumed to be “costless” under a current policy baseline plus $1.5 trillion in additional deficits permitted), deficit increases ...
President Donald Trump then signed the bill into law on December 22, 2017.
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.
President-elect Donald Trump campaigned on lowering the US corporate income tax rate to 15 percent. He made the same request in 2017 when Republicans passed their tax cuts, but Congress only cut the federal rate to 21 percent—down from the worldwide high of 35 percent.
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.
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.
The “no tax on overtime” provisions are included in Section 70202 of the One Big Beautiful Bill Act (OBBB), which was signed into law on July 4, 2025.
For a $17.50/hour rate, overtime pay (typically time-and-a-half) is $26.25 per hour ($17.50 x 1.5) for hours worked over 40 in a week, resulting in $420 for 8 hours of overtime, or an extra $210 on top of regular pay for 8 overtime hours. The basic calculation is your hourly rate (e.g., $17.50) multiplied by 1.5 (for time-and-a-half) and then by the number of overtime hours worked.
Did No Tax on Tips pass? Yes, No Tax on Tips became law on July 4, 2025. It was part of larger tax legislation that included No Tax on Overtime, which also was enacted.
No Tax on Overtime Will Reduce Federal Revenues
The Joint Committee on Taxation estimates that the deduction will reduce revenues by $90 billion over the 2025 to 2034 budget period. However, that cost all occurs over the next four years, as the deduction is currently set to expire in 2028.
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.
The "No Tax on Overtime" is a new federal income tax deduction (for 2025-2028) from the One Big Beautiful Bill Act (OBBBA) that allows eligible workers to deduct the "premium" portion (the extra half in time-and-a-half pay) of their overtime from their taxable income, up to $12,500 ($25,000 joint), reducing their AGI, but it's not a full exemption, as regular pay and payroll taxes (FICA) still apply, with income phase-outs.
The three tax breaks Trump referenced are all temporary and in effect from 2025 through 2028. They are federal breaks; state and local taxes may still apply.
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.
The Tax Cut and Jobs Act (TCJA) reduced statutory tax rates at almost all levels of taxable income and shifted the thresholds for several income tax brackets (table 1). As under prior law, the tax brackets are indexed for inflation but using a different inflation index (see below).
Before the Trump tax cuts (Tax Cuts and Jobs Act of 2017 - TCJA), individual income tax rates ranged from 10%, 15%, 25%, 28%, 33%, 35%, up to a top rate of 39.6%, with different income brackets for single and married filers, while the top corporate tax rate was 35%, significantly higher than the post-TCJA 21% rate. The TCJA maintained seven brackets but adjusted rates and income thresholds, alongside major changes to deductions, credits, and the corporate tax structure, notes this Tax Foundation article.
The One, Big, Beautiful Bill Provides the Biggest Relief to Low-Income Families. The One, Big, Beautiful Bill will cut taxes for Americans earning under $50,000 by 14.9%. 66% of The One, Big, Beautiful Bill's tax cuts benefit families making less than $500,000.
The Tax Cuts and Jobs Act of 2017 was legislation passed by the 115th Congress and signed into law by President Donald Trump.
Does the Trump Tax Plan Affect Capital Gains Tax Rates? Trump's tax law leaves existing capital gains tax rates and income tax brackets unchanged. Capital gains remain a key consideration for investors, especially those with taxable brokerage accounts, real estate holdings or long-term investment portfolios.