Affects on trucking from no overtime tax 2025-2028

People that watch too much TV must decide the thing of the moment will change the world, when it will make no change in the world like the last 30 things on TV.

 

Under current LAW (NOT RULE) 29 USC Code § 213 (b) (1) Drivers subject to the Secretary of Transportation are exempted from the overtime requirements of 29 U.S. Code § 207.

I am not going to copy and paste the full text of 29 U.S. Code § 213, but the full text of all exempted categories can be found HERE.

Here is the section about Truckers.

The provisions of section 207 of this title shall not apply with respect to—
(1) any employee with respect to whom the Secretary of Transportation has power to establish qualifications and maximum hours of service pursuant to the provisions of section 31502 of title 49;

Sorry guys, but until Congress changes these laws, Truckers will NOT be paid overtime.

 

When it really comes to the bottom line, very little is going to change, if any, concerning how trucking operations work. This bill really has little effect on the industry.

 

Employers CAN choose to pay overtime. The law doesn't require it.

While drivers imagine the company is aching to pay overtime which solves every driver problem, why would anyone choose to pay more for something if they don't have to?

 

This is an incorrect statement. Although there are very few of them compared to the OTR trucking segment, they do exist. I know. I retired from one last year at the age of 60.

 

In many states, the law DOES require it; New York considers anything over 44 hours in a week or 10 hours in a day as overtime. And since there is no consideration federally as to what overtime actually is, state laws prevail.

I predict that for those local drivers who get paid hourly, they will earn a bit more. And then people will ask for overtime, which will limit new openings.

 

My take is that this is worthless to most of the trucking industry, and really most workers in general. Given truck drivers are not typically paid hourly there is no separate calculation for the credit that a filer can claim at the ends of the tax year. Additionally, those truckers that are paid hourly usually earn enough that they will be at, or near, the limit of being able to claim this deduction based on their overall earnings.

As a motor carrier employer there is very little incentive to pay by the hour, and even if OOIDA (among others) gets their wish and the federal preemption on overtime is removed from USC, nothing will change. The removal of the overtime exemption will not magically make shippers and receivers value a driver's time or force carriers into hourly pay plans! It would make calculating the overtime tax credit easier, as everyone's mileage based pay would be converted to an hourly wage figure for reporting purposes, but beyond that nothing else changes.

If the overtime exception is removed, all that will happen is that rates will be minimally adjusted so that the mileage and accessorial pay meets the base state's minimum wage rules and time and half will be paid on the base rate for all hours "worked" over 40. The kicker is, with base pay still being mileage based, drivers will still be incentivized to log off-duty as much as possible to conserve their 60/70 hour clock, so the pay will not change but pennies! I would even look for major motor carriers to shift their hiring practices to encourage hiring from states with lower minimum wages to avoid adjusting their base mileage pay at all.

Example, using federal minimum wage of $7.25 per hour your minimum earnings to meet labor law, if overtime exemption was removed is:
$7.25 x 40 = $290 base pay (1st 40 hours)
$10.88 x 30 = $326.40 overtime (for those burning the full 70 hours in a week)
Minimum wages paid to meet federal overtime rules $616.40

Even if we use the highest state minimum wage of $17.50 which, ironically enough, is in the District of Columbia:
$17.50 x 40 = $700 base pay (1st 40 hours)
$26.25 x 30 =$787.50 overtime (again assuming full 70 hour on-duty time logged)
Minimum wages paid to satisfy overtime requirements $1,487.50

Now, let's look further. The maximum no tax on overtime credit is $12,500, and at these minimum wage numbers nobody is hitting that, so it makes very little overall difference at the end of the year. Overtime tax on the highest calculation above, $787.50 x 52 weeks is $40,950 in overtime earnings. The typical tax base rate would be 20%, so only $8,190 is paid as federal income tax (probably less as I am being generous with my assumptions), so the most credit you get is the tax paid into the system, not the full $12,500 cap. Yes, $8,000 a year is nice, and can be game changing for some, but it is not something to get overly excited about in the long run.

In conclusion, trucking pay rates, at least OTR, will likely stay mileage based for the foreseeable future even if they have to then convert these to hourly pay for reporting purposes as it will keep the driver's incentivized to chase the mile instead of the dollar. This will have little to no positive effect on driver earnings, nor will it help safety. It is all smoke and mirrors.

 

Ok this tread has a lot wrong in it so I'm going to try and address as much as I can.

1-The reality is nationwide only 2-3% of people in all industries will see any meaningful benefit. This will make more sense after I explain everything.

2-if eligible for the benefit it is only on the premium! This is the extra portion not the full overtime pay, it I'll show an example $20hr. So OT pay is $30hr the premium is the 1/2 so it $10
So to get $12500 exemption one needs 1250hrs of overtime in the above example. I'll post the language of the rules at the bottom.

3. Even if you work for a company or in a state that results in one getting overtime pay that does not mean you are going to get the exemption, this is a federal change not a state and it affects federal taxes so the federal rules trump the state rules, the language of the law/rule/regulation matters.

4. They have decided what Ot is and who it applies too, I'm going to paste the section from H.R.1 aka the big beautiful bill, or aka the ######## bill.

From H.R.1 title VII section 70202 No tax on overtime, page 103 of the pdf downloaded directly from fed gov page

‘‘(c) QUALIFIED OVERTIME COMPENSATION.—
‘‘(1) IN GENERAL.—For purposes of this section, the term
‘qualified overtime compensation’ means overtime compensation
paid to an individual required under section 7 of the Fair
Labor Standards Act of 1938 that is in excess of the regular
rate (as used in such section) at which such individual is
employed"

6 so there is a lot to break out of this one the exemption is specific to the FLSA regulated employees only, I could past some from that but Im not making a novel, so I'll sum it up, do you drive a truck across state lines or even if you don't are you a Part 49 fmcsr company that is registered for interstate commerce/ a safety sensitive employee, is the truck over 10,000lbs, so even a local FedEx, ups, driver ect all will make you unable to claim the exemption as most drivers are regulated by the federal motor carrier safety regulations and drive trucks over 10k.

Next it's says "a rate that is in excess of the regular rate". This is why my example above is there and why I said premium it's only the 1/2 above and even the irs site now states this, so the qualified amount that premium not the other part.

This is long enough, basically your 97.5% not getting this exemption as a truck driver regardless of if you do get paid hourly!!!!
‘

 

I made a large analysis of this to outline all kinds of different industries that don't get the exemption the x.com link is below.

https://x.com/venivincentvici/status/1953540441292607754?t=k6SOKQrTQkcFT1wqNl5unQ&s=19

 

It's a lot like not taxing tips. Just a big smoke screen that really does not benefit the person as much as make it look good for the politician or party.
They can say 'look how we saved you money'... on the front end, while on the back end you are hosed.