New Bill Lets Overtime Workers Keep All Their Extra Pay, Starting Now

The "Keep Every Extra Penny Act of 2025" just changed the tax game for anyone pulling extra hours. This new law says that any overtime pay you earn is not considered part of your gross income for tax purposes. Basically, the extra cash you make for working those late nights or long weekends? The IRS won't touch it, effective immediately for amounts received after the enactment date (SEC. 2).

Overtime Gets a Tax Break

This bill straight-up changes the Internal Revenue Code (adding Section 139J, if you're into the details) to exclude overtime pay from your taxable income. It's using the Fair Labor Standards Act of 1938 (Section 7) definition of overtime, so we're talking about those hours you clock beyond the standard 40-hour workweek. Think of a retail worker who puts in 50 hours during a busy holiday week—those extra 10 hours of pay are now tax-free.

Real-World Wins

For folks in hourly jobs, this could be a game-changer. If you're a construction worker, a nurse, or anyone regularly putting in overtime, this means more money in your pocket, period. Say you make $20 an hour and work 10 hours of overtime (at time-and-a-half). That's $300 extra, and under this new law, none of it gets hit with federal income tax. This could also be an incentive for people to take on those extra shifts, which could help businesses that are short-staffed.

The Fine Print

While this is good news for many, there are a couple of things to keep an eye on. There is a risk that some employers might try to play the system, reclassifying regular wages as "overtime." There's also the chance that high-income earners could try to work the new rules, shifting their income to "overtime" to avoid taxes. Those would be serious issues to watch out for as this bill rolls out. But, for most of us working regular jobs and pulling some extra hours, this means more cash in hand, plain and simple.