What's Happening?
A recent analysis by Policy Matters Ohio has revealed that the 'no tax on overtime' benefit, part of a federal budget bill signed by President Trump in July 2025, will not significantly benefit the majority of Ohio workers. The provision allows employees
to deduct qualified overtime compensation from federally taxable income. However, the report indicates that more than 90% of Ohio workers will not see substantial savings from this measure. The benefit is primarily advantageous to households earning between $100,000 and $500,000 annually, with those earning above $300,000 receiving reduced benefits as the deduction phases out. The deduction is temporary and set to expire in 2028.
Why It's Important?
The findings highlight a disparity in the distribution of tax benefits, with higher-income households reaping the most significant advantages. This raises concerns about the effectiveness of the policy in providing relief to lower and middle-income workers who might benefit more from such tax breaks. The limited impact on the majority of Ohio workers suggests that the policy may not fulfill its intended purpose of broadly reducing tax burdens on overtime earnings. This could influence future discussions on tax policy and economic equity, particularly in states like Ohio where the majority of workers are not seeing the intended benefits.
What's Next?
As the 'no tax on overtime' provision is temporary, set to expire in 2028, there may be calls for its reevaluation or extension. Policymakers might consider adjustments to make the benefit more inclusive and impactful for lower-income workers. Additionally, the separate 'no tax on tips' benefit included in the same legislation is undergoing analysis, which could further inform policy adjustments. Stakeholders, including labor groups and economic policy advocates, may push for reforms to ensure more equitable tax relief.
