No Tax on Overtime Pay: Overtime Tax Exemption 2025 Updates
Takeaway Read our blog post to learn the essentials you need to know about the “No Tax on Overtime” provision of the recent budget reconciliation bill. This exemption retroactively begins on Jan. 1, 2025, and will remain in place through 2028. Catch up on some quick definitions and learn about reporting and compliance topics employers will need to take into account in the coming years. A budget reconciliation bill known as the “One Big Beautiful Bill” was recently signed into law. This bill contains notable provisions, including one which eliminates federal taxes on tips . Another part of this bill eliminates the taxes paid by employees on overtime hours worked. Let’s go over some information that will help you stay informed about this legislation. What is overtime pay and how is it currently taxed? Overtime pay is the premium that employers pay employees for working longer than a standard number of hours within a specified period. For most employees, overtime is considered to be ...