No taxes on overtime! This is great news for many American citizens who work more hours to earn extra money. A new piece of legislation is coming to the United States: the passing of the tax reform called ‘’One Big Beautiful Bill’’, brought by Donald Trump.
This bill is part of other tax reforms proposed by the Republican Party in order to fulfill what Donald Trump promised during the campaign of the 2024 presidential elections.
So, if you are one of those people who work more than 40 hours per week, you should keep reading to know how this bill will affect you.
Passed by the Senate!
The new tax reform to remove taxes on overtime was passed by the Senate on the 1st of July of 2025, with 51 votes in favor and 50 against. The Vicepresident JD Vance had the decisive vote, which allowed the bill to continue and be voted on by the House of Representatives. If it passes, it will be signed by the President and become a law.
Changes with this new law
Of course, what’s most attractive about this law is the fact that tax on overtime will be removed, which will benefit those who work more than 40 hours a week – mostly in hourly wage jobs.
But, let’s talk about numbers, shall we? People will be able to deduct up to $12,500 of the total earned amount per extra hour from their taxable income. However, couples filing together will deduct up to $25,000. Have in mind, all of this will apply from tax year 2025 to 2028.
Basically, people eligible for this deduction, will pay less taxes and could receive higher refunds or owe less money to the IRS.
There are some conditions
Although this law would be for those working more than 40 hours a week, not everybody will enjoy this deduction: if you earn more than $150,000 a year, you won’t be able to have access to this deduction. This also applies to those couples earning more than $300,000 per year together.
It should be also clarified that this exemption doesn’t apply to all taxes: payroll taxes like Social Security and Medicare will continue to charge a percentage on all income, including overtime. What about state taxes? These won’t be affected either, but pay attention to them because they change depending on the state. Some states also charge income taxes, and this law doesn’t change that.
How much money can you save?
According to the White House, it’s estimated that eligible workers for this deduction could save up to $2,000 every year on federal taxes, which represents net additional income. However, the Tax Policy Center did some calculations in February 2025 which estimated this amount won’t be the same for everybody, so let’s have a look:
- Only 2% of all households in the U.S. would actually benefit from this deduction.
- The average savings for that group would be about $1,800 a year.
Moreover, for people with lower incomes (less than $33,000 per year), the benefits are:
- Just 1.4% of these families would receive significant savings, and on average, it would be about $450 a year.
- For the majority in that low-income group, the average benefit would be only $10 a year, a virtually symbolic amount.
This is because, among other things, low-income people do not tend to work much overtime or already pay little or no federal income tax, so they do not have as much to deduct from their taxable income.
Donald Trump and his team
Former President Donald Trump, in an official statement on June 24, 2025, celebrated this reform by saying:
“The One Big Beautiful Bill delivers the largest tax cut in history for working and middle-class Americans.”
For his part, Treasury Secretary Scott Bessent also praised the bill in a message posted on X (formerly Twitter) on June 30. He said that this reform continues the line of the 2017 tax cuts, and that in addition to the benefit on overtime, the package includes other measures:
- No tax on tips.
- Immediate 100% deduction for certain investments (expensing).
- Fewer regulations.
- Border security measures.
- Stability in fiscal policies.
His message was, “The list goes on and on, and the American people are the big beneficiaries.” So, let’s hope American citizens get the benefits they are promised as soon as possible.
