Bill > HF1024

This bill proposes to exclude overtime pay from Iowa's individual income tax calculation. Specifically, the bill allows taxpayers to subtract from their taxable income any compensation earned at a rate of at least 1.5 times their regular pay rate, as authorized under the federal Fair Labor Standards Act (29 U.S.C. §207). This means that when workers receive overtime pay - typically defined as hours worked beyond 40 in a workweek - that portion of their earnings will be exempt from state income tax. The tax exemption will take effect for tax years beginning on or after January 1, 2026, which means taxpayers will first be able to claim this exemption when filing their 2026 tax returns in early 2027. By reducing the taxable income for workers who earn overtime, the bill aims to provide a financial benefit to employees who work additional hours beyond their standard schedule.

Budget and Finance

Ways and Means (House)

https://www.legis.iowa.gov/legislation/BillBook?ga=91&ba=HF1024