This bill amends Section 422.7 of the Iowa Code by adding a new subsection that specifically excludes overtime pay from the individual income tax. The new provision allows individuals to subtract from their taxable income the portion of their compensation that is earned at a rate of not less than one and one-half times their regular rate of pay, as authorized under U.S.C. 207.
The bill is set to take effect for tax years beginning on or after January 1, 2026, thereby providing tax relief to workers who earn overtime compensation. This change aims to alleviate the tax burden on individuals who work additional hours beyond the standard workweek.
Statutes affected: Introduced: 422.7