MONTGOMERY — Legislation establishing an up to $1,000 state tax deduction for overtime compensation passed the House Ways and Means Education Committee on Wednesday.
The bill by State Rep. James Lomax (R-Huntsville) would establish an Alabama individual income tax deduction for qualified overtime compensation not to exceed $1,000 per taxpayer. The bill is temporary and expires at the end of 2028.
An uncapped overtime tax cut sponsored by House Minority Leader (D-Huntsville) was passed into law in the 2023 session but expired in June 2025.
Lomax said in the committee meeting on Wednesday, "We don't want to gut the (Education Trust Fund) in any way, but we want to provide tax relief for those who are working hard."
"This is a responsible bill. It's a bill that I think gives targeted relief to overtime workers and has the original intent of what we did a couple years ago but in a way that doesn't take away a large amount from our education budgets," he added. "This provides a cap so it's a $1,000 tax credit. It's not just all overtime wages being tax-free. This is very similar to what they're doing on the federal level now. It's based on up to a $1,000 of qualified overtime pay per year. The fiscal note on that is about $37.4 million."
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