No Tax on Overtime Passes in Trump’s Big Beautiful Bill: What to Know

The Senate’s passage of President Donald Trump’s sweeping tax reform, the One Big Beautiful Bill Act, marked progress on a key campaign promise by including a provision to eliminate federal income taxes on overtime pay for certain workers.

The Senate passed the bill—a sweeping Republican-led tax reform package—on July 1, following a record-breaking vote-a-rama. The measure narrowly advanced in a 51-50 vote, with Vice President JD Vance casting the decisive vote.

Why It Matters

Numerous tax-saving promises were made by Trump during his 2024 election campaign as he vowed to bring down costs and put money into the pockets of American workers.

President Trump promoted the no-tax-on-overtime policy as a way to boost blue-collar incomes and reward extra effort. Estimates from the White House suggest that workers benefiting from the deduction could see up to $2,000 in annual federal tax savings.

What to Know

The policy will impact Americans who work beyond standard hours—40 for those in full-time roles—in hourly wage jobs. The no-tax-on-overtime provision would allow individuals to deduct up to $12,500 of overtime pay from their taxable income for tax years 2025 through 2028, while couples filing jointly could deduct up to $25,000.

The deduction phases out for those earning more than $150,000 individually, or $300,000 as a couple. This move does not eliminate payroll taxes for Social Security and Medicare on overtime income, nor does it affect state taxes.

The White House projects average savings of up to $2,000 annually for qualifying workers.

But while it could save money for eligible workers, the nonpartisan Tax Policy Center estimated in February this year that only 2 percent of all U.S. households would benefit, with an average tax cut of around $1,800.

For the lowest-earning households taking home less than $33,000 a year, very few will see significant gains; just 1.4 percent would be expected to benefit by about $450 a year, while the average increase is only $10 for most in this income group.

What People Are Saying

President Donald Trump said in an official White House statement on June 24, 2025: “The One Big Beautiful Bill delivers the largest tax cut for working- and middle-class Americans in history.”

Treasury Secretary Scott Bessent said in a post on X, formerly Twitter, on June 30: “President Trump’s historic 2017 tax cuts drove a major economic boost that benefited all Americans in his first term. The One, Big, Beautiful Bill doubles down on that trajectory with no tax on tips, no tax on overtime, 100% expensing, regulatory rollbacks, border security, and policy certainty. The list goes on and on, and the American people are the beneficiaries.”

What Happens Next

The One Big Beautiful Bill Act now returns to the House of Representatives for a final vote. If it passes, it will be sent to the President’s desk to be signed into law.