Louisiana House approves tax deduction for overtime compensation under HB 194

Louisiana's House Bill 194 is making waves as it proposes a new income tax deduction aimed at easing the financial burden on residents earning overtime. Introduced on March 31, 2025, the bill seeks to allow taxpayers to deduct overtime compensation from their taxable income, a move that could significantly impact many working families across the state.

The bill defines "overtime compensation" in accordance with the Fair Labor Standards Act, specifically targeting those hours worked beyond the standard 40-hour workweek. Taxpayers would be eligible for a deduction equal to the amount of overtime earned, capped at 20% of their other wages from the same employer. However, this benefit is limited to individual taxpayers whose adjusted gross incomes do not exceed specified thresholds: $200,000 for married couples filing jointly, $150,000 for heads of household, and $100,000 for single filers.

Supporters of HB 194 argue that this measure could provide much-needed relief for lower and middle-income families, potentially boosting disposable income and stimulating local economies. However, critics are raising concerns about the bill's fiscal implications, questioning whether it could lead to reduced state revenue at a time when funding for essential services is already strained.

As the bill moves forward, debates are expected to intensify, particularly regarding its long-term economic impact and the fairness of income thresholds. If passed, the provisions would take effect on January 1, 2026, marking a significant shift in Louisiana's tax policy aimed at supporting workers who often face the challenges of balancing long hours with financial stability. The outcome of this legislation could set a precedent for how states address overtime compensation in the future.