Minneslate Logo

SF4624 (Legislative Session 94 (2025-2026))

Federal deduction for qualified overtime compensation adoption

AI Generated Summary

Purpose

  • To adopt the federal treatment of qualified overtime compensation into Minnesota personal income tax by adding a new section that creates an overtime-related subtraction to Minnesota taxable income.

Main provisions

  • Adds Subd.40, titled “Overtime income,” to Minnesota Statutes 2024, section 290.0132.
  • The amount of qualified overtime compensation that the federal Internal Revenue Code allows as a deduction (under section 225) would be treated as a subtraction from Minnesota taxable income.
  • The subtraction is allowed despite (overrides) the federal rule described in Internal Revenue Code section 225(g) for the purposes of Minnesota tax.
  • This subtraction applies to taxable years beginning after December 31, 2028 (i.e., starting with tax year 2029 and later).

Significance and expected impact

  • Taxpayers who receive qualified overtime compensation could reduce their Minnesota taxable income beginning in 2029.
  • The bill aligns Minnesota law with a federal approach to overtime pay, at least as applied to the subtraction from income for state tax purposes.
  • It creates a new tax provision outside the standard deduction framework by allowing a subtraction rather than a credit or standard deduction.

Implementation notes

  • The amount eligible for subtraction is tied to the federal deduction for qualified overtime compensation (as defined by Internal Revenue Code Section 225).
  • The use of “Notwithstanding” indicates Minnesota will permit the subtraction even if federal rules under IRC Section 225(g) would limit it.

Relevant Terms - qualified overtime compensation - overtime income - subtraction - deduction - Internal Revenue Code (IRC) - Section 225 - Notwithstanding - paragraph g - Minnesota Statutes 2024 section 290.0132 - Subd.40 - taxable years beginning after December 31, 2028 - overtime income (as a defined category)

Bill text versions

Actions

DateChamberWhereTypeNameCommittee Name
March 23, 2026SenateActionIntroduction and first reading
March 23, 2026SenateActionReferred toTaxes

Citations

 
[
  {
    "analysis": {
      "added": [
        "A new subdivision (Subd. 40) adding the 'Overtime income' subtraction.",
        "The subtraction is based on qualified overtime compensation allowed as a deduction under Internal Revenue Code §225."
      ],
      "removed": [],
      "summary": "Adds Subd. 40 'Overtime income' to Minnesota Statutes 2024 section 290.0132 to adopt a federal deduction for qualified overtime compensation. The deduction is a subtraction from taxable income, based on Internal Revenue Code section 225, and is available for taxable years beginning after December 31, 2028.",
      "modified": [
        "Introduces a delayed effective date for the deduction, applying to taxable years beginning after December 31, 2028."
      ]
    },
    "citation": "Minnesota Statutes 2024 § 290.0132",
    "subdivision": "Subd. 40"
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "References the federal Internal Revenue Code section 225 to define the subtraction for qualified overtime compensation.",
      "modified": []
    },
    "citation": "Internal Revenue Code §225",
    "subdivision": ""
  }
]

Progress through the legislative process

17%
In Committee

Sponsors

Loading…