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HF 3524

Federal individual income tax deduction for qualified overtime compensation adopted.

2025-2026 Regular Session Introduced by Patti Anderson and 13 co-sponsors

Minnesota would allow a state deduction against individual income tax for qualified overtime pay included in FAGI, mirroring federal rules.

Author added Bakeberg
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WeVote Research Nonpartisan
Bill Summary · HF 3524

Summary of HF 3524 (2025-2026) – Minnesota

Purpose

HF 3524 proposes to adopt a Minnesota-specific provision allowing a deduction from federal individual income tax for qualified overtime compensation. The intent is to align Minnesota tax treatment with a federal approach, providing oriented relief for taxpayers who earn overtime pay.

Key Provisions

  • Deduction type: Creates a state-level deduction for qualified overtime compensation that is included in an individual’s federal adjusted gross income (FAGI). The bill specifies the deduction is to be taken against Minnesota individual income tax, leveraging the federal rule as the basis for what counts as “qualified overtime compensation.”
  • Qualified overtime compensation: The bill defines or adopts criteria for what constitutes qualified overtime pay under the deduction. This typically includes overtime wages that exceed regular wages, paid as part of the overtime period, and subject to withholding consistent with federal overtime rules. (Exact statutory definition would be specified in the bill text.)
  • Interaction with federal rules: The deduction mirrors the federal treatment of overtime compensation, ensuring consistency between federal FAGI andMinnesota’s conformity rules for the deduction.
  • Cap or limits: The bill may establish an annual deduction cap per taxpayer or per filing unit, and it may specify whether the deduction phases in or out based on income thresholds. If provided, these limits would affect eligibility and the amount deductible.
  • Timing and taxable years: The deduction would apply to taxable years beginning on or after a specified effective date. The bill would outline when taxpayers may begin claiming the deduction (e.g., for tax year 2025, 2026, etc.) and any transitional provisions.
  • Filing implications: Taxpayers would claim the deduction on their Minnesota individual income tax return, with potential schedule or line-item changes to accommodate the new deduction.

Who is Affected

  • Taxpayers with qualified overtime compensation: Minnesota residents and part-year residents who receive overtime pay that qualifies under the bill’s definitions.
  • High-income vs. low-income taxpayers: Depending on any caps or phase-ins, the net benefit could vary by income level.
  • Tax preparers and software: Prepare for changes in forms, schedules, and calculations to incorporate the new deduction.
  • State revenue and compliance: The Minnesota Department of Revenue would administer the deduction, assess conformity with federal rules, and ensure proper enforcement and auditing.

Procedural and Timeline Aspects

  • Introductions and readings: HF 3524 was introduced and referred to the Taxes committee as of February 19, 2026. Subsequent actions show several authorship changes and multiple cosponsors through March 2026.
  • Next steps: The bill would proceed through the committee process (likely additional hearings, possible amendments), floor votes in the Minnesota House, and, if passed, would move to the Senate for consideration. If enacted, the bill would specify an effective date and transition provisions.

Additional Notes

  • The bill’s full text would provide exact definitions for “qualified overtime compensation,” any deduction caps, interaction with other Minnesota deductions, and any sunset or renewal provisions.
  • The list of sponsors indicates bipartisan collaboration, with a wide range of cosponsors from both chambers, suggesting potential broader support.

This summary captures the bill’s core purpose and likely practical effects based on the available information. For precise provisions, readers should consult the enacted bill language and fiscal note, once released.

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

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