Time runs out on Alabama overtime tax exemption

MONTGOMERY, Ala. (WIAT) — A tax relief on overtime hours sunsets Monday after Alabama lawmakers did not extend the cut in the 2025 legislative session.

Republicans said other tax breaks have a greater impact. Yet Alabama House Minority Leader Anthony Daniels, D-Huntsville, said the hard work that comes with overtime should be rewarded.

“It’s a mistake, and I think that we’re going to look back at this and say, ‘Hey, we should’ve thought long and hard about it,'” Daniels said.

State Sen. Arthur Orr, R-Decatur, said it’s not a mistake. He said tax reductions on items like groceries and baby products will benefit more working Alabamians.

“Everyone goes to the grocery store, and so we’ve accomplished that in reducing our grocery taxes and hopefully, we’ll continue to do that,” Orr said. “But we want it as broad-based as we can make it.”

Orr said a bill moving through Congress could cut overtime taxes at the federal level.

“Now that the federal government has taken the lead after Alabama initiated it and led it … going back to 2023,” Orr said. “Now, we’ll look again at that and see if that doesn’t make sense for our state.”

Daniels said it’s a good gesture from the federal government, but it’s going to put pressure on states to act.

“How is this going to impact productivity from an industry standpoint?” Daniels said. “How is it going to impact tax dollars coming into our budget? So I think there are a lot of things that should have been considered.”

A tax relief on groceries, baby products and feminine products will start Sept. 1.