MONTGOMERY, Ala. – The Alabama Legislature is considering bringing back a tax cut on overtime wages.
House Bill 527 – filed on Thursday by House Majority Whip Rep. James Lomax, R-Huntsville – would establish an individual income tax deduction of up to $1,000 on Alabamians’ overtime pay.
“Affordability is the number one issue in our country, and I want Alabama to be a state that prioritizes lightening the load for its working families,” Lomax said in a press release. “My legislation follows the lead President Trump set in the Big Beautiful Bill by providing up to $1,000 in income tax deductions for overtime. The people of Alabama deserve to keep more of their hard-earned money, and I am committed to making sure that is exactly what happens.”
If passed, the new deduction would be valid for money earned between Jan. 1, 2025 and Dec. 31, 2027.
The overtime tax cut isn’t new to Alabama.
The state first adopted an overtime tax cut, carried by House Minority Leader Anthony Daniels, D-Huntsville, in 2023. Initial estimates said the cut would cost the state about $34 million in lost revenue annually, but the final cost for the cut’s 18-month existence ballooned to over $400 million.
The bill was a sunset law set to expire in June of 2025, and despite bipartisan support, the House never put Daniels’ proposed permanent extension to a vote. Republican leadership instead prioritized a four-bill package of tax cuts sponsored by Education Budget Chair Rep. Danny Garrett, R-Trussville.
That package reduced the state sales tax on groceries from 3% to 2%, granted the authority to local municipalities to lower their own sales tax on groceries, doubled tax exemptions for seniors drawing from retirement and increased tax-exempt income for lower- and middle-income earners.
Garrett, along with 11 other Republican representatives, is a sponsor of Lomax’s bill.
If passed, the new deduction would be valid for money earned between Jan. 1, 2025, and Dec. 31, 2027.
The bill now heads to Garrett’s committee for consideration.