No Tax on Overtime: President Donald Trump’s campaign promise to eliminate taxes on overtime pay has sparked widespread interest and debate across the United States. This policy, part of a broader tax reform agenda, aims to put more money in the pockets of hardworking Americans who clock extra hours. Alongside proposals like "no tax on tips," the "no tax on overtime" initiative has gained traction but also raised questions about its implementation, economic impact, and timeline. This article dives into the details, updates, and implications of this policy, with a focus on its status at the federal level and in states like Ohio, as well as its connection to other tax relief measures.
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No Tax on Overtime Bill 2025: When Will It Start?
The "no tax on overtime" proposal is a key component of what Trump has called the "One Big, Beautiful Bill," a sweeping budget resolution that includes significant tax cuts. The U.S. House of Representatives passed this budget plan on February 25, 2025, with a narrow 217-215 vote, setting the stage for tax exemptions on overtime pay, tips, and Social Security benefits. However, the bill is not yet law, as it requires Senate approval and President Trump’s signature.
If passed, the federal income tax exemption on overtime pay is expected to take effect for the fiscal years 2026 through 2034, meaning workers might not see changes in their paychecks until early 2026. The House must finalize budget bills by June 30, but Congress faces no strict deadline beyond the start of the new fiscal year on October 1, 2025. Delays, such as potential government shutdown threats, could push the implementation to late 2025 or early 2026.
| Key Milestone | Date | Status |
|---|---|---|
| House Budget Resolution Passed | February 25, 2025 | Completed (217-215 vote) |
| Senate Vote on Budget Bill | Pending (Expected late spring/early summer 2025) | Awaiting approval |
| Potential Effective Date | October 1, 2025 (Fiscal Year 2026) | Subject to Senate approval and President’s signature |
| Paycheck Impact | Early 2026 | Dependent on IRS updates and final passage |
No Tax on Overtime Details
The "no tax on overtime" policy aims to exempt overtime pay from federal income tax for workers who log more than 40 hours per week under the Fair Labor Standards Act (FLSA). This would apply to approximately 97.7 million overtime-eligible workers, including 82.1 million hourly and 15.5 million salaried employees. Overtime pay, which must be at least 1.5 times the regular hourly rate, would remain subject to payroll taxes like Social Security and Medicare.
A specific bill, the Overtime Wages Tax Relief Act, introduced by Senators Roger Marshall (R-Kansas) and Tommy Tuberville (R-Alabama) on May 6, 2025, proposes a deduction of up to $10,000 for individuals and $20,000 for married couples on overtime pay. The deduction phases out for high earners, starting at $100,000 for individuals and $200,000 for couples, decreasing by $50 for every $1,000 above these thresholds. This measure aims to benefit low-to-moderate-income workers but has raised concerns about potential revenue losses, estimated at $866 billion to $1.3 trillion over ten years if extended to payroll taxes.
| Aspect | Details |
|---|---|
| Eligible Workers | ~97.7 million (FLSA overtime-eligible) |
| Tax Exemption | Federal income tax on overtime pay (payroll taxes still apply) |
| Deduction Limits | $10,000 (individuals), $20,000 (married couples) |
| Income Phase-Out | Starts at $100,000 (individuals), $200,000 (couples) |
| Estimated Cost | $866 billion (income tax only) to $1.3 trillion (with payroll taxes) over 10 years |
Critics, including the Economic Policy Institute, argue that the policy could encourage employers to overwork employees instead of hiring new staff and may lead to revenue losses that impact public services. Supporters, however, see it as a direct boost to workers’ take-home pay, incentivizing extra hours and stimulating economic growth.
Trump No Tax on Overtime Update
President Trump has been a vocal advocate for the "no tax on overtime" policy, reiterating its importance in a March 2025 speech to Congress and during campaign stops in 2024. He frames it as a way to reward "the hardest-working citizens" and boost workforce participation. The policy is bundled with other tax cuts, including the extension of the 2017 Trump tax cuts and the "no tax on tips" proposal, in the House’s budget resolution.
Recent developments show progress but also challenges. The House’s budget resolution, passed in February 2025, is a non-binding blueprint, meaning specific legislation like the Overtime Pay Tax Relief Act (H.R. 561) must still pass both chambers. Senate Republicans are exploring a "current policy" baseline to make the tax cuts appear cost-neutral, which could ease passage through budget reconciliation, requiring only a simple majority (51 votes) in the Senate.
However, fiscal conservatives and Democrats have raised concerns about the $4.5 trillion tax cut package’s impact on the deficit and potential cuts to programs like Medicaid.
No Tax on Overtime Ohio
In Ohio, a state-level effort to exempt overtime pay from state income tax has seen some activity but no concrete results yet. House Bill 39, introduced by Representatives Tex Fischer (R-Boardman) and Nick Santucci (R-Niles), was proposed in November 2024 but did not pass before the Ohio Legislature’s session ended in December.
Reintroduced in 2025, the bill remains in a House committee without a hearing as of March 2025. If passed, it would complement federal efforts by increasing workers’ take-home pay from overtime at the state level.
Ohio’s current tax code follows federal guidelines, taxing overtime pay as regular income. The state’s lack of progress contrasts with Alabama, which implemented a state overtime tax exemption in 2023, though it is set to expire in June 2025 unless extended. Ohio workers hoping for relief will likely need to wait for both federal and state bills to advance.
| State | Status of No Tax on Overtime | Potential Start Date |
|---|---|---|
| Ohio | House Bill 39 pending in committee | No confirmed date |
| Alabama | Active since 2023, expires June 30, 2025 | Currently in effect |
| Minnesota | Proposed, pending Senate approval | January 1, 2025 (if passed) |
| Missouri | Proposed, effective January 1, 2026 (if passed) | No confirmed date |
No Tax on Tips
The "no tax on tips" proposal, closely tied to the overtime tax exemption, has gained significant momentum. On May 20, 2025, the Senate unanimously passed the No Tax on Tips Act, which creates a deduction for cash tips up to $25,000 for workers earning less than $160,000 annually. This bill, introduced by Senator Ted Cruz (R-Texas) and co-sponsored by Democrats like Senator Jacky Rosen (D-Nevada), now awaits House approval. If passed, it would apply to traditional tipped occupations, with the Trump administration defining eligible jobs within 90 days of enactment.
The proposal has strong public support, particularly in service-heavy states like Nevada, where the Culinary Workers Union praised it for benefiting hospitality workers. However, critics, like the advocacy group One Fair Wage, argue it distracts from raising the minimum wage and may primarily benefit higher earners or lead to businesses reclassifying payments as tips to exploit the exemption. The estimated cost to the federal budget ranges from $70 billion to $107 billion over ten years.
When Does the Senate Vote on No Tax on Overtime?
As of May 24, 2025, the Senate has not scheduled a specific vote on the "no tax on overtime" provision within the broader budget bill. The House’s budget resolution, passed in February, included the overtime tax exemption, but the Senate’s competing resolution, passed on February 21, 2025, focused on other priorities like border enforcement and defense, leaving tax cuts for later consideration. Reconciliation between the House and Senate plans is ongoing, with a potential vote expected by late spring or early summer 2025.
The Senate’s narrow Republican majority (53 Republicans, 45 Democrats, 2 Independents) means a 60-vote majority is typically required, but the budget reconciliation process could allow passage with just 51 votes, bypassing a filibuster. Posts on X, like one from @Pat_Riot_AF, urge supporters to contact senators to push for approval, reflecting public anticipation but no confirmed timeline.
Overtime Tax Bill Effective Date
If the "no tax on overtime" bill is included in the final budget reconciliation package and signed into law by President Trump, the earliest effective date would likely be October 1, 2025, aligning with the new fiscal year. However, changes to paychecks would not appear until early 2026 due to IRS processing and employer payroll adjustments. The Overtime Wages Tax Relief Act specifies the exemption would apply through 2029, with income restrictions to limit benefits for high earners.
Delays could arise if Senate negotiations stall or if concerns about the $4.5 trillion tax cut package’s fiscal impact lead to revisions. States like Minnesota and Missouri are also eyeing 2025 or 2026 for their own overtime tax exemptions, potentially aligning with federal changes.
| Legislation | Proposed Effective Date | Expiration | Status |
|---|---|---|---|
| Federal Overtime Tax Exemption | October 1, 2025 (Fiscal Year 2026) | 2029 | Pending Senate approval |
| Ohio House Bill 39 | No confirmed date | N/A | In committee |
| Alabama Overtime Exemption | In effect since 2023 | June 30, 2025 | Active, may expire |
No Tax On Overtime: Conclusion
The "no tax on overtime" proposal, alongside the "no tax on tips" initiative, represents a bold effort to boost the financial well-being of American workers. While the House has laid the groundwork with its February 2025 budget resolution, the Senate’s approval remains a critical hurdle. Workers in states like Ohio are also watching for state-level relief, but progress is slow. As the Senate debates and reconciles the budget, the timeline points to a potential start in late 2025 or early 2026. While supporters celebrate the potential for fatter paychecks, critics warn of revenue losses and labor market distortions. For now, workers and employers alike should keep an eye on Congress and prepare for a possible payroll shift in the near future.
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