Madison, WI – Legislation authored by Rep. Paul Melotik (R-Grafton) and Sen. Rob Hutton (R- Brookfield) that would cut Wisconsin’s income tax on overtime pay received a public hearing Thursday before the Assembly Committee on Ways and Means at the State Capitol.
Assembly Bill 461 creates a state income tax cut for overtime earnings so that pay received above an employee’s regular rate, as defined under the federal Fair Labor Standards Act, is not subject to state income tax. The bill is structured to align with the Internal Revenue Code as most recently amended, helping to minimize differences between state and federal tax law. The
main difference is that the Wisconsin version does not have a sunset clause like the federal version, making it permanent.
Under the proposal, eligible overtime compensation reported on required wage statements would qualify for the cut. The legislation includes reasonable guardrails, consistent with federal policy, to ensure relief is focused on workers who rely most heavily on overtime pay.
To better target middle income earners and professions where overtime is common, AB 461 caps the cut at $12,500 per year for individual filers and $25,000 for joint filers. The benefit phases out for taxpayers with adjusted gross incomes between $150,000 and $275,000, or between $300,000 and $550,000 for joint filers.
“When people stay late, pick up extra shifts, and put in the hours to keep Wisconsin moving, they deserve to keep more of what they earn,” Melotik said. “This bill recognizes the value of hard work and ensures our tax system does not discourage workers from stepping up when they are needed most.”
Melotik emphasized that aligning the bill with federal tax definitions is a deliberate choice. “By matching federal standards, we are keeping this policy straightforward and easy to administer,” he said. “That means fewer surprises at tax time and a smoother process for workers, employers, and tax preparers alike. Unlike the federal provision, Wisconsin’s version does not sunset, making this a long term and meaningful tax cut for hard working Wisconsinites.”
Rep. Melotik added that the proposal would benefit both workers and the state’s economy.
“From factory floors to hospital wards and public safety departments, overtime is essential,” he said. “AB 461 is a commonsense way to reward work, strengthen our workforce, and make Wisconsin a more competitive place to live and work.”
