Trump’s ‘no tax on overtime’ is now US law — but some Americans don’t even qualify. Here’s the catch

Then there are those workers whose overtime pay is dictated by different agreements or laws. The WSJ pointed to airline and railroad workers as examples of those “who often get overtime pay under union contracts and are exempt from FLSA because they are covered by the Railway Labor Act.” These workers generally will not qualify for the deduction on their contract overtime.

They added that “One result is different treatment for similar jobs. An airline jet mechanic wouldn’t get the deduction but an airplane mechanic at a separate maintenance company could.”

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Beyond the immediate monetary effect, a more broad catch to the new law could make itself known in the long run.

The Economic Policy Institute (EPI) raised concerns that the law will incentivize many to work as much overtime as possible to gain the extra income, including evenings and weekends — habits “associated with a range of negative impacts on physical and mental health, well-being, and productivity.”

In addition, those unable to work overtime for personal or health reasons will lose out on the benefits. The EPI called the law “another gimmick that does more harm than good” and suggested that offering workers raises so they don’t have to work the extra hours would prove a better option.

Forbes, meanwhile, labeled the law “a stealth anti-job creation measure” because it lessens the need for employers to hire more workers.

“A 50-hour week for one employee can be replaced by tacking on an additional 10 hours across five separate workers. The overtime deduction thus may boost take-home pay for some, but it does so by encouraging a labor distribution that concentrates hours in the hands of fewer people.”

That said, according to Tax Policy Center estimates, only 9% of American households will actually save money by paying fewer taxes on overtime pay, resulting in an average added windfall of roughly $1400 annually. Most workers will see the benefit at tax time.

And, of course, there’s one final caveat to the “no tax on overtime pay” law: it expires in 2028.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.