Trump's no-tax-on-overtime proposal: What to know

During his campaign, President Donald Trump pledged to end taxes on overtime pay, as well as other things like tips and Social Security, if elected to the White House again. After his inauguration, he signed numerous executive orders with a range of targets like diversity programs, immigration and climate policies, and more. 

However, those didn’t include cutting taxes on overtime. So where does that proposal stand?

Here’s what to know:

How overtime is taxed

The backstory:

Overtime pay is taxed like regular wages, subject to federal income tax, and Social Security and Medicare taxes, according to personal finance site Kiplinger.

The Fair Labor Standards Act (FLSA) mandates that eligible employees receive at least 1.5 times their base pay for hours clocked beyond the typical 40-hour workweek.

By the numbers:

Roughly 8% of U.S. hourly workers and 4% of salaried workers work FSLA-qualified overtime on a regular basis, according to Yale’s Budget Lab, citing data from the Department of Labor and Bureau of Labor Statistics. An additional 4% of hourly workers and 1% of salaried workers do so occasionally.

Trump’s no-tax-on-overtime proposal

What we know:

Trump has said he would support legislation to eliminate taxes on overtime pay, saying it gives people "more of an incentive to work." "It gives the companies a lot, it’s a lot easier to get the people," he said in September at a campaign rally in Tucson, Arizona. 

What we don't know:

Further details about Trump’s proposal have not been shared, including whether it would indeed cut both income tax and payroll taxes on overtime pay. 

What they're saying:

"The people who work overtime are among the hardest working citizens in our country and for too long, no one in Washington has been looking out for them," Trump said during his Sept. 12, 2024, rally. 

Critics, meanwhile, have pointed to the loss in tax revenue. If taxes were cut on overtime pay, it could reduce revenue by as much as $1.7 trillion between the 2026 and 2035 period on a static basis, according to the nonprofit Committee for a Responsible Federal Budget

The Tax Foundation, a think tank that collects data and publishes research studies on U.S. tax policies, said the move "would significantly distort labor market decisions."

"Employees would be encouraged to take more overtime work, and hourly or salaried non-exempt jobs may become more attractive if the benefit is not extended to salaried employees who are exempt from Fair Labor Standards Act (FLSA) overtime rules," the organization wrote. "Trump’s proposal would also affect employers as employees find ways to request more overtime work, raising employer labor costs."

Trump’s no-tax-on-tips proposal

What we know:

In June, Trump originally announced his plan to exclude workers’ tips from federal taxes, saying he got the idea from a waitress at his Las Vegas hotel.

"To those hotel workers and people who get tips, you are going to be very happy, because when I get to office we are going to not charge taxes on tips, people making tips," Trump said, adding: "We’re going to do that right away, first thing in office."

What we don't know:

Further details have not officially been unveiled about the proposal, including whether he wants to exempt tips from just income taxes or from the payroll tax as well.

By the numbers:

The U.S. Bureau of Labor Statistics estimates there are 2.24 million restaurant servers across the country, with tips making up a large percentage of their income.

What they're saying:

 Trump returned to Nevada over the weekend and again pledged to cut tax on tips. "In the coming weeks, I'll be working with Congress to get a bill on my desk that cuts taxes for workers, families and small businesses," he told the crowd, signaling the proposal is a priority.

FILE - U.S. President Donald Trump speaks to reporters in the Oval Office of the White House on Jan. 23, 2025, in Washington, D.C. (Photo by Anna Moneymaker/Getty Images)

Trump’s no-tax-on-Social-Security proposal

What we know:

Trump pledged throughout his campaign for tax cuts for older Americans, posting on Truth Social in July that "SENIORS SHOULD NOT PAY TAX ON SOCIAL SECURITY!"

Dig deeper:

The challenge is that taxes on Social Security benefits help to pay for the program. The loss of revenue could mean that Social Security would be unable to pay out its full benefits in 2033, two years ahead of the current estimate, according to Brendan Duke of the liberal Center for American Progress.

According to the Social Security Administration, recipients must currently pay federal income taxes if combined income — 50% of the benefit amount plus any other earned income — is higher than $25,000 annually if filing individually, or $32,000 if filing jointly.

The Source: This story was reported citing statements made by President Donald Trump during his 2024 campaign, as well as recently in Las Vegas, Nevada, on Jan. 25, 2025. It also includes information published by the Committee for a Responsible Federal Budget, the Budget Lab at Yale, and the Tax Foundation.

Donald J. TrumpEconomyU.S.