The Wisconsin Senate on Tuesday approved a bill that would exempt overtime earnings from state income tax and send Assembly Bill 461 to Gov. Tony Evers for consideration.

The bill was authored by State Sen. Rob Hutton and Rep. Paul Melotik. Supporters said the measure would reduce state tax collections by about $150 million a year.

Under the bill, overtime pay as defined by the federal Fair Labor Standards Act would qualify for a subtraction from Wisconsin taxable income. The subtraction would apply to overtime earnings reported on W-2 forms.

“When Wisconsinites step up to take on extra shifts and keep our communities running, they shouldn’t be penalized by the tax code,” Hutton said in a statement after the vote.

The bill includes income limits. Supporters said those provisions mirror changes made in federal tax law under the One Big Beautiful Bill Act.

Lawmakers said the bill was written to align with federal tax treatment of overtime income. Under that approach, workers would use similar rules on their federal and Wisconsin tax returns when claiming the exemption.

“Families need that money more than the government,” Hutton said.

The bill would not change how overtime pay is calculated or paid. Employers would continue to follow existing wage laws. The measure would change only the state income tax treatment of overtime earnings.

Supporters said workers would claim the subtraction when filing Wisconsin income tax returns. The amount would equal overtime earnings reported on their W-2 forms.

The bill first passed the Assembly before moving to the Senate. The Senate approved it Tuesday with bipartisan support.

The measure now goes to Evers, who can sign it, veto it, or allow it to become law without his signature. The governor’s office has not announced a position on the bill.

If enacted, the exemption would apply beginning with the current tax year, allowing eligible workers to claim it on 2026 Wisconsin income tax returns filed in 2027.

The Wisconsin Department of Revenue would be responsible for updating tax forms and instructions if the bill becomes law.

Source: Hutton Bill Eliminating Overtime Tax Headed to Governor | Urban Milwaukee