Trump’s “No Tax on Overtime” Law Now in Effect
A major 2024 campaign promise, the new overtime tax exemption is officially active—but its benefits are more limited than they appear.
The “No Tax on Overtime” law, part of Trump’s “Big Beautiful Tax Bill”, took effect in July 2025. It aims to reduce the tax burden on middle-income Americans by exempting part of their overtime wages from federal income tax.
Key Details:
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Exempts half of the federally mandated overtime premium (“time-and-a-half”).
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Applies retroactively from January 2025 to December 2028.
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Exemption cap: $12,500 per worker or $25,000 per couple.
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Ineligible: Individuals earning over $150,000 and couples above $300,000.
Limitations:
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Payroll taxes for Social Security and Medicare still apply.
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State and local taxes remain unless states adopt similar rules.
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Only benefits hourly, non-exempt workers under FLSA—not salaried employees.
Criticism:
Experts warn the law could push employees into unhealthy amounts of overtime and discourage new hiring. The Tax Policy Center estimates only 9% of U.S. households will benefit, with average savings around $1,400 per year.
