This bill amends Section 422.7 of the Iowa Code to exclude overtime pay from the individual income tax. Specifically, it introduces a new subsection that allows taxpayers to subtract the portion of their compensation earned for workweeks exceeding forty hours, provided that this compensation is paid at a rate of not less than one and one-half times but not exceeding twice the regular rate, 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 alleviate the tax burden on individuals who earn overtime pay, thereby potentially increasing their take-home income.

Statutes affected:
Introduced: 422.7