4.28.25 – Shreveport Times – Presley Bo Tyler
Key Points
- The House passed a budget bill proposing federal spending cuts, tax cuts, and increased funding in certain areas.
- The bill includes a proposal to eliminate federal income tax on overtime pay.
- The bill needs Senate approval and the President’s signature to become law.
- Louisiana currently taxes overtime pay, but plans to implement a flat state income tax rate of 3% in 2026.
Back in February, the House passed a budget bill establishing the congressional budget for the 2025 fiscal year and setting forth budgetary levels for the fiscal years 2026 through 2034.
This bill proposed cutting trillions of dollars in federal spending in order to pay for trillions in tax cuts, while also increasing federal funding within certain areas.
The bill passed the passed the House, with a 217-215 vote, however, nothing can be done with the bill until Senate approval.
When will ‘no tax on overtime’ start? What Louisiana residents should know
The proposal to remove the federal income tax on overtime pay would ease financial burdens on workers by exempting overtime pay from taxation.
However, states that have a state income tax still have the possibility of paying state income tax on overtime.
In Louisiana, overtime pay, like all wages, is subject to both federal and state income tax.
Currently, Louisiana’s state income tax rate ranges from 1.85% to 4.25%, depending on income level. Then, overtime pay is added to gross income and taxed alongside your regular earnings, according to SmartAsset.
However, this will change in 2026 when you do your tax year 2025 tax return, since Louisiana plans to switch to a flat tax rate of 3%, says Intuit Turbo Tax Blog.
No tax on overtime, and other measures within the House budget bill, will go into effect once the bill passes the Senate and is signed into law. Before the bill can be signed into law by President Trump, the Senate will have to agree upon the bill.
Once the bill passes both the House and Senate, it will be sent to the president’s desk, where he will have 10 days to sign it.
In relation to this, the House must pass all budget bills by June 30, however, Congress has no official deadline other than Oct. 1, which is when the fiscal year begins, according to Bipartisan Policy Center.
If the budget bill is signed into law before the deadline, then the bill will go into effect when the new fiscal year begins on Oct. 1. Although, there will not be any exemptions on paychecks until after this year, as the budget bill concerns budget levels for 2026 through 2034.
Presley Bo Tyler is a reporter for the Louisiana Deep South Connect Team for Gannett/USA Today. Find her on X @PresleyTyler02 and email at PTyler@Gannett.com