Of course, nothing has been finalized yet, but legislators have provided some details worth noting.
On June 16, 2025, the Senate Finance Committee released legislative text, intended for inclusion in the Senate’s version of the budget reconciliation bill.
The committee’s proposal came about three weeks after the House passed HR 1, outlining many tax-related measures, such as making overtime compensation non-taxable income.
The write-ups for both the Senate and the House have incorporated the phrase that originated with President Trump: “no tax on overtime.”
Here’s what we know so far about the direction the Senate is going.
Currently, employees’ earnings are subject to federal income tax, Social Security tax and Medicare tax — without any distinction between OT and straight-time pay.
To be clear, no one’s calling for changes involving Social Security and Medicare taxes. The House and Senate are focused specifically on federal income tax.
Important: Payroll would continue to withhold federal income tax from employees’ earnings each pay period, even if employees worked overtime hours.
Also, as companies have been doing, they’d code overtime pay in their payroll systems. However, this question would become key: What constitutes overtime pay under the One Big Beautiful Bill Act?
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