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HF 1365

Individual income tax subtraction provided for overtime pay.

2025-2026 Regular Session

Minnesota bill would exclude overtime pay from state income tax, reducing taxes for workers earning overtime hours but reducing state tax revenue.

Introduction and first reading, referred to Taxes
#taxation-income
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WeVote Research Nonpartisan
Bill Summary · HF 1365

Legislative bill overview

HF 1365 would create a state income tax subtraction for overtime compensation earned by Minnesota residents. This means overtime pay would be excluded from taxable income, effectively reducing the state income tax burden for workers who earn overtime. The bill appears designed to provide tax relief specifically targeted at hourly and wage workers.

Why is this important

Overtime work is common among service, manufacturing, and healthcare workers who often have limited control over their hours. A tax subtraction could meaningfully increase take-home pay for these workers, though the revenue impact to the state would depend on how many Minnesotans earn overtime and the cost to the state budget. This touches on questions about tax fairness—whether certain types of income should be treated differently—and wage policy during economic conditions.

Potential points of contention

  • Revenue and fiscal impact: The state would lose tax revenue from overtime earnings; the total cost depends on uptake and could be significant if widely used
  • Horizontal equity concerns: Critics may argue this creates unfair treatment between workers earning overtime versus those earning equivalent salaries or other forms of compensation
  • Definitional questions: What qualifies as "overtime pay" (federal overtime, voluntary overtime, different industries) could affect eligibility and compliance complexity
  • Alternative approaches: Some may prefer direct wage increases, overtime premium adjustments, or broader tax reform over targeted income exclusions

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

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