H.R. 557: Working Class Bonus Tax Relief Act of 2025

This bill, titled the Working Class Bonus Tax Relief Act of 2025, proposes changes to the Internal Revenue Code to allow individuals to deduct certain amounts received as bonuses from their taxable income. Below is a breakdown of the key provisions:

Deduction for Bonuses

• Deduction Amount: Individuals will be allowed to deduct up to 15% of their non-bonus wages when they receive a bonus from the same employer within the same taxable year.
• Income Limitations: The ability to claim this deduction has specific income thresholds:
  • For married couples filing jointly, the adjusted gross income limit is set at $200,000.
  • For heads of households, the limit is $150,000.
  • For all other individuals, the limit is $100,000.
• Termination of Deduction: This deduction will not be available for bonuses received after December 31, 2029.

Conforming Amendments

The bill includes necessary amendments to other sections of the Internal Revenue Code to reflect the addition of this new deduction for bonuses. Specifically, it will add a new section (Section 224) to the relevant part of the code focusing on income deductions.

Non-Itemizers

• Deduction for Non-Itemizers: The bill allows this deduction to be accessible to individuals who do not itemize their deductions, ensuring they can benefit from the bonus deduction as well.

Impact on Itemizers

• Not Treated as a Miscellaneous Deduction: For those who do itemize, this deduction will not be counted as a miscellaneous deduction subject to limitations.
• Overall Limitation: The bonus deduction will not be included in the overall limitation that applies to other deductions, which can be beneficial for taxpayers with higher incomes.

Withholding Adjustments

The bill requires the Secretary of the Treasury to update withholding tables and procedures to accommodate the new bonus deduction, ensuring that federal tax withholding reflects the allowable deductions.

Effective Date

The amendments proposed by this bill will be effective for amounts received following the enactment of the legislation.

Relevant Companies

None found.