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HF 110

A bill for an act excluding overtime pay from the individual income tax, and including applicability provisions.

2025-2026 Regular Session Introduced by Mike Sexton

Iowa bill excludes overtime wages from state income tax, reducing taxes on workers' extra earnings while decreasing state revenue.

Committee report approving bill, renumbered as HF 1024.
#incometaxes #salariesandwages #taxexemptions
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WeVote Research Nonpartisan
Bill Summary · HF 110

Legislative bill overview

HF 110 would exclude overtime pay from Iowa's individual income tax calculation, meaning workers would not owe state income tax on wages earned through overtime work. The bill has advanced through committee with unanimous support and includes applicability provisions detailing how the exclusion takes effect.

Why is this important

This directly affects Iowa workers' take-home pay by allowing them to retain more earnings from overtime hours. For workers regularly working beyond standard hours—particularly in manufacturing, healthcare, agriculture, and service industries—this could represent meaningful annual tax savings. The policy signals a state-level choice to incentivize or reward overtime labor through tax policy rather than wage requirements.

Potential points of contention

  • Revenue impact: Excluding overtime from taxation reduces state tax revenue; the bill's fiscal note would clarify the budgetary cost and whether this strains state services or requires offsetting cuts
  • Fairness questions: Critics may argue this primarily benefits workers in certain industries while potentially disadvantaging salaried employees or those unable to work overtime, raising equity concerns
  • Definition and administration: "Overtime pay" requires clear definition (federal FLSA standards vs. state standards) and may create compliance complexity for employers and the state tax department in determining which compensation qualifies

Compiled from official sources — confirm details with the bill’s official record.

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