A cornerstone of President Donald Trump’s economic agenda—eliminating taxes on overtime pay—remains intact in a sweeping Senate bill passed July 1, 2025. If enacted, the provision could deliver larger refunds to millions of American workers without changing their regular paychecks.
What’s included in the bill?
The Senate’s 887-page legislation, nicknamed the “One Big Beautiful Bill Act,” passed after a tense vote-a-rama session, with Vice President JD Vance casting the tie-breaking vote. While many elements of the bill evolved since it cleared the House in May, the no overtime tax plan was left unchanged.
The House version proposed fully deducting the overtime pay premium from income taxes for over 80 million hourly workers. The Senate’s version sets a cap:
- $12,500 deductible for individual filers
- $25,000 for joint filers
- The provision would last through 2028
How would it work?
Rather than boosting take-home pay directly, the measure would allow eligible workers to deduct overtime earnings on their tax returns the following year. This could increase annual tax refunds.
Other tax breaks included in the bill:
- Deductions for tip income
- Deductions for car loan interest
Eligibility details may vary depending on your profession. For example, firefighters must work over 53 hours a week before qualifying for overtime pay, according to the International Association of Fire Fighters.
Potential economic effects
The Tax Foundation says the policy could encourage workers to volunteer for more overtime hours. However, employers might respond by limiting overtime opportunities to manage rising labor costs.
On the fiscal side, the Congressional Budget Office estimates this measure could reduce federal revenue by $124 billion over several years.
What happens next?
The bill now returns to the House, where final changes could be made. A vote is expected Wednesday, with Republican leaders pushing to deliver the bill to President Trump by July 4.
Trump has signaled support for the bill but acknowledged the challenge of balancing tax cuts with budget concerns. “I don’t want to go too crazy with cuts,” he told reporters Tuesday.
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