INDIANAPOLIS — President Donald Trump made good on his campaign promise to eliminate tax on overtime. The "No Tax on Overtime" legislation was signed into law via the “One, Big, Beautiful Bill Act."

The tax-exempt benefits are retroactive, and they apply all the way back to the beginning of 2025. However, as with most laws, there are limits and exclusions.

First, the exemption applies only to federal income tax. You will still pay state and local taxes, Social Security and Medicare taxes on overtime earnings.

The portion excluded from federal income tax is only the 'half' of your time-and-a-half pay. For example, if you earn $20 an hour and your overtime pay is $30, the $10 difference is the part that you won't pay income tax on.

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