You’ve probably heard the buzz. During the 2024 campaign, Donald Trump made a pretty bold claim at a rally in Tucson: he wanted to end all taxes on overtime pay. It sounds simple. You work more than 40 hours, you keep every penny of that time-and-a-half. But honestly, the reality of Trump on overtime pay is a lot more layered than a campaign slogan.
It isn’t just about taxes. It’s about who actually qualifies for those extra bucks in the first place.
Whether you’re a manager at a retail chain or a technician on a factory floor, how the government defines "overtime" determines if you’re getting a bigger check or just a "thank you" for your extra ten hours of work. If you've been following the news, you know that the rules for this have been a total tug-of-war between the Trump and Biden administrations for years.
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The Big Idea: No Tax on Overtime Pay
Trump’s most recent pitch basically treats overtime like a sacred cow. He argued that nurses, police officers, and factory workers are the backbone of the country and shouldn’t be "punished" for working harder. The proposal is to exempt the 150% pay premium from federal income tax. Some versions of the plan even suggest cutting payroll taxes (Social Security and Medicare) on those hours too.
But here is where it gets kinda complicated. Economists at the Tax Foundation and the Committee for a Responsible Federal Budget (CRFB) have pointed out that this could cost the government anywhere from $227 billion to over $1 trillion over a decade. Why the huge range? Because if overtime becomes tax-free, everyone is going to want to reclassify their pay as "overtime."
Imagine a scenario where a boss lowers your base hourly rate but "guarantees" you five hours of overtime every week to make up for it. Suddenly, a huge chunk of your income is tax-free. It’s a massive incentive for "gaming" the system, which sounds great for the worker's wallet but might be a nightmare for the IRS to track.
The Salary Threshold Battle
To understand Trump on overtime pay, you have to go back to a boring-sounding thing called the "salary threshold." Under the Fair Labor Standards Act (FLSA), if you make less than a certain amount of money, your employer must pay you overtime. If you make more than that, and you have certain "executive" or "professional" duties, they don't have to pay you a dime extra.
- The Obama Era: They tried to push the limit to $47,476. A court blocked it.
- The First Trump Term: Trump’s Department of Labor set the threshold at $35,568 in 2019.
- The Biden Era: Biden pushed it way up—aiming for $58,656 by 2025.
In late 2024, a federal judge in Texas (Judge Sean Jordan) actually struck down the Biden increase. He basically said the Department of Labor went too far and made salary more important than what the person actually does at work. Because of that ruling, the rules reverted back to the Trump-era level of $35,568.
This is a big deal. It means if you earn $40,000 a year, under Biden's rule, you’d be getting overtime. Under the current "Trump-standard" enforced by the courts, your boss can likely keep you late for free if you have "management" duties.
What Project 2025 Says About Your Time
There’s been a lot of talk about "Project 2025" and how it might influence a second Trump term. While Trump has distanced himself from some of it, the labor section—written by former Trump officials like Jonathan Berry—suggests some radical shifts in how we calculate work.
One idea is "period averaging." Instead of looking at a 40-hour week, employers could look at an 80-hour two-week period.
Example: You work 50 hours in Week 1 and 30 hours in Week 2. Currently, you get 10 hours of overtime. Under the proposed change, your average is 40 hours per week, so you get zero overtime pay.
The argument for this is "flexibility." The argument against it is that it essentially lets companies "smooth out" your hours to avoid paying the time-and-a-half premium. There’s also a proposal to let workers choose "comp time" (paid time off) instead of cash, which sounds nice until you realize the employer often gets to decide when—or if—you can actually use that time off.
Real-World Impact: The Higher Ed and Retail Crunch
When the courts blocked the Biden expansion and kept the Trump-era rules, it sent shockwaves through sectors like higher education. Universities have thousands of "mid-level" employees—admissions officers, athletic trainers, and researchers—who often work 60-hour weeks during peak seasons.
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If the threshold is low, these people stay "exempt." They get their base salary and nothing more. If the threshold is high, the university either has to give them a massive raise to keep them exempt or start paying thousands in overtime. Business groups generally favor the lower Trump-era threshold because it provides "predictability" and lower labor costs.
Actionable Steps for Workers and Employers
Whatever your politics, the rules are shifting. Here is how to stay ahead of the changes regarding Trump on overtime pay and the current legal landscape.
- Audit Your Classification Now: Don't wait for a tax change. If you earn between $35,568 and $58,656, your status is currently in a legal "gray zone" depending on pending appeals. Check your job description against the FLSA "duties test."
- Track Every Minute: If the "No Tax on Overtime" proposal actually moves through Congress, the IRS will likely require much stricter reporting of hours. Start using a digital log now so you have a "paper trail" of what is base pay vs. overtime.
- Watch the 5th Circuit: The Department of Labor is currently appealing the Texas ruling. If the court sides with the government, the higher salary threshold could come back. If they side with the judge, the $35k floor is here to stay for a while.
- Check Your State Laws: This is the most important part. States like California, New York, and Washington have their own overtime thresholds that are much higher than the federal $35,568. Trump’s federal policies won't change those state-level protections.
The conversation about overtime isn't just about a line on a tax return. It’s about the value of an hour. As the 2026 tax debates loom, the push to make "extra work" tax-free will likely be at the center of the fight for the American blue-collar vote.
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Whether it leads to a fatter paycheck or just a more complicated tax form remains to be seen. But for now, the "Trump standard" remains the law of the land: a lower entry point for overtime eligibility, but a promise of keeping more of that money if you can get it.