Rep. Moran on the Importance of Overtime Tax Deduction
As the 51勛圖厙 marks nearly one year since manufacturers secured a major tax victory in Congress, we continue to spotlight the lawmakers who championed this landmark legislation and provisions that are already making a difference.
Why it matters:Manufacturing workers are some of the hardest-working people in this country, and theyve long understood that overtime isnt a bonusits how they keep the line running, meet a contract deadline or respond to a surge in demand, said Rep. Moran.
- Under the Working Families Tax Cuts, manufacturing workers can now deduct the premium portion of their overtime paythe half in time-and-a-halffrom their federal taxable income, he explained. So, if a worker earns $24 an hour and works 10 hours of overtime a week, thats $12 per hour in deductible premium.
- Over 50 weeks, thats $6,000 removed from their taxable income. For a worker in the 22% bracket, that translates to roughly $1,300 in federal tax savings for the yearmore than $100 extra in their pocket every single month.
The workforce angle:Rep. Moran also emphasized the importance of this deduction for recruiting and retaining manufacturing employeesand by extension filling the persistent talent gap in the sector.
- Thanks to this provision, a manufacturer doesnt have to raise the hourly overtime rate to make overtime more attractiveCongress has effectively increased the after-tax value of every overtime hour already being paid, he said. For a plant manager trying to fill a second shift or retain a skilled operator whos being recruited by a competitor, thats a meaningful talking point.
- In East Texas, Ive heard from manufacturers who are already incorporating this into their recruiting conversations, he added. Employers are seeing a renewed interest in overtime-heavy roles that used to be harder to fill.
What manufacturers should do:When asked what companies should do to benefit from the overtime deduction, Rep. Moran said, Most importantly, tell your workers. Put it on the bulletin board, mention it at the shift meeting, work it into your onboarding conversations.
- A lot of workers wont learn about this deduction until they sit down to file their taxesand by then, theyve already missed months of planning around it, he continued.
- And make sure to document the impact, he added. When the time comes to debate whether to extend this provision beyond 2028, the strongest argument Congress can make is a real one. If your employees are benefiting, capture that story. Share it with your association, share it with your team, share it with my office. That kind of evidence is what moves legislation.
Dive deeper:Check out the full Q&A
