Panel hears bill to align Nebraska with federal overtime and tip deductions

Senator John Kavanaugh told the Revenue Committee LB 932 would mirror recent federal changes allowing a deduction for qualified overtime compensation and tip income so the change affects Nebraska taxpayers as well as federal filings. He said the bill would allow deductions up to $12,500 in qualified overtime compensation for an individual, up to $25,000 for a married couple and up to $25,000 in qualified tip income, and that Nebraska must pass a statute to incorporate those federal deductions into state income‑tax calculations.

Senator Merriman asked about the fiscal note’s pattern — higher in the first year, then dipping — and Kavanaugh explained that the pattern reflects a scheduled step‑down in tax brackets that temporarily alters the state revenue effect. Proponents including Lucas Bolton of the State Troopers Association said overtime is not optional for public‑safety work and that the deduction would help troopers keep more of earnings that arise from responding to serious incidents and covering shifts.

Bolton argued the change recognizes that overtime pay frequently reflects necessary public‑safety work rather than voluntary extra hours. The committee recorded proponent letters and one opponent letter; Kavanaugh closed the hearing and the committee did not take a vote.