This bill amends Section 422.7 of the Iowa Code to exclude overtime compensation from the individual income tax. Specifically, it introduces a new subsection that allows taxpayers to subtract the portion of their earnings that is derived from overtime work, defined as hours worked beyond forty in a week and compensated at a rate of at least one and one-half times the regular pay, in accordance with federal law (29 U.S.C. 207).

The provisions of this bill will take effect for tax years beginning on or after January 1, 2026. This change aims to provide financial relief to workers by ensuring that their overtime earnings are not subject to state income tax, thereby potentially increasing their take-home pay.

Statutes affected:
Introduced: 422.7