Louisiana proposes overtime deduction legislation for low-income taxpayers

House Bill 194, introduced in Louisiana on March 31, 2025, aims to provide a tax deduction for overtime compensation, potentially benefiting many workers across the state. The proposed law stipulates that eligible taxpayers can deduct overtime pay received, capped at 20% of their other wages from the same employer for the taxable year.

Eligibility for this deduction is limited to resident individual taxpayers with adjusted gross incomes below specific thresholds: $200,000 for married couples filing jointly or surviving spouses, $150,000 for heads of household, and $100,000 for single filers or those married filing separately. This targeted approach seeks to assist lower and middle-income earners who may rely on overtime to supplement their income.

The bill is set to take effect on January 1, 2026, and applies to taxable periods beginning on that date. While the proposal has garnered support for its potential to alleviate financial pressure on working families, it has also sparked debates regarding its long-term economic implications. Critics argue that the income caps may exclude many workers who could benefit from the deduction, while supporters emphasize the importance of incentivizing overtime work in a recovering economy.

As discussions continue, the bill's fate remains uncertain, but its introduction signals a legislative effort to address wage disparities and support the workforce in Louisiana. If passed, House Bill 194 could reshape how overtime compensation is taxed, impacting the financial landscape for many residents.