The "Working Class Bonus Tax Relief Act of 2025" allows a tax deduction for bonuses up to 15% of an individual's wages, subject to income limitations, and is available to both itemizers and non-itemizers, but terminates after 2029.
Don Bacon
Representative
NE-2
The "Working Class Bonus Tax Relief Act of 2025" allows eligible individuals to deduct bonuses from their taxable income, up to 15% of their non-bonus wages, with income limitations. This deduction is available to both itemizers and non-itemizers and is set to expire after December 31, 2029. The Treasury will adjust withholding tables to reflect this new deduction, which applies to bonuses received after the Act's enactment.
Working Class Bonus Tax Relief Act of 2025 Offers Temporary Tax Break on Bonuses, Starting 2025
The Working Class Bonus Tax Relief Act of 2025 lets certain workers deduct part of their bonus pay from their taxes, but it’s not for everyone and it’s only temporary. Here's the deal:
Bonus Bucks Back
This bill introduces a new tax deduction specifically for bonuses. If you get a bonus from your job, you might be able to deduct up to 15% of your regular wages from that bonus amount. So, if you made $50,000 in regular wages and got a $10,000 bonus, you could potentially deduct up to $7,500 (15% of $50,000) of that bonus from your taxable income. This applies to amounts received after the enactment of this Act, provided it becomes law. (SEC. 2).
Who's In, Who's Out?
There are income caps to qualify. If you're married filing jointly, you need to make under $200,000 (combined). Heads of household have a $150,000 limit, and everyone else is capped at $100,000. If you're above those, no bonus deduction for you. (SEC. 2).
- Example: A construction worker earning $85,000 a year with a $5,000 bonus could deduct the full bonus amount, as it is less than 15% of their regular wages. A software engineer making $120,000 a year with a $20,000 bonus would be over the income limit for single filers and wouldn’t qualify.
The Fine Print
Even if you don't itemize deductions, you can still claim this one. That's a plus for folks who usually take the standard deduction. The bill also tells the Treasury Secretary to update those withholding tables (the ones that determine how much tax comes out of your paycheck) to reflect this new deduction. (SEC. 2). This might mean a little less paperwork for some, but it's also more work for the IRS.
Clock's Ticking
This isn't a forever deal. The deduction disappears after December 31, 2029. So, it's a temporary boost, not a long-term change to the tax code. (SEC. 2). While this could put a bit more money in some pockets in the short run, it is not a permanent fix to any financial issues. Also, there is a potential that employers could reclassify wages as bonuses to take advantage of the deduction.