Second Job Tax Relief Act of 2025

Bill Number

H.R. 560

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Taxation

Status

Introduced

Latest Action

2025-01-20: Referred to the House Committee on Ways and Means.

Last Updated

2025-02-25T20:01:35Z

AI-Generated Summary

Purpose of the Legislation

The "Second Job Tax Relief Act of 2025" (H.R. 560) aims to provide tax relief to certain workers by excluding income from secondary (additional) jobs from federal income taxes and payroll taxes. This encourages extra work without full tax penalties, targeting those with a primary full-time job.

Key Provisions

• Exclusion from Gross Income: Adds a new section (139J) to the Internal Revenue Code (IRC), allowing "qualifying taxpayers" to exclude "secondary employment compensation" from their taxable gross income.
• Qualifying Taxpayer: An individual who elects one "primary employer" for the tax year, defined as an employer for whom they worked at least 2,080 hours on an hourly basis (roughly a full-time schedule of 40 hours per week for 52 weeks).
• Secondary Employment Compensation: Wages from any other employer in the same tax year, after designating the primary one.
• Phase-Out Mechanism: The exclusion reduces gradually (but not below zero) if the taxpayer's modified adjusted gross income (MAGI—a measure of income after certain deductions) exceeds $100,000 for single filers or $150,000 for married couples filing jointly. The phase-out occurs over a $50,000 income range.
• Application to Payroll Taxes:
• Excludes secondary compensation from Social Security taxes (with offsets to trust funds from the general federal budget to prevent shortfalls).
• Excludes it from unemployment taxes and wage withholding (income tax deducted from paychecks).
• Temporary Nature (Sunset Clause): The income exclusion applies only to tax years starting within 5 years of enactment.
• Effective Date: Applies to compensation received after the date the bill is enacted into law.

Significant Changes to Existing Law

• New Tax Exclusion: Introduces the first specific IRC provision (Section 139J) for excluding secondary job income, previously fully taxable like primary income.
• Payroll Tax Amendments: Modifies Sections 3121(a), 3306(b), and 3401(a) of the IRC to exempt secondary compensation from Social Security, unemployment, and withholding taxes—changes not previously available for extra job earnings.
• Budget Neutrality for Social Security: Appropriates funds from the general Treasury to Social Security trust funds (Old-Age, Survivors, Disability, and Hospital Insurance) to cover revenue losses, ensuring these programs are not directly harmed.
• Clerical Update: Adds the new section to the IRC's table of contents.

Potential Impacts

• On Citizens: Provides financial relief to hourly workers with second jobs, potentially increasing take-home pay by 10-37% (depending on tax brackets) on that income. Benefits lower- and middle-income full-time workers most, but phases out for higher earners. May encourage more secondary employment to supplement income.
• On Government Agencies: The IRS will need to administer elections for primary employers and phase-outs, increasing administrative workload. The Treasury Department faces short-term revenue losses (offset for Social Security but not other taxes), potentially adding to the federal deficit. Social Security Administration trust funds remain protected via general fund transfers.
• On International Relations: No direct impacts, as this is a domestic tax policy focused on U.S. workers and revenue.

Main Stakeholders Affected

• Workers: Primarily hourly employees with a full-time primary job (e.g., retail, service, or manufacturing workers) who take secondary jobs; excludes salaried or part-time-only workers.
• Employers: Primary and secondary employers may see simplified payroll tax withholding; secondary employers could attract more workers due to tax incentives.
• Government Entities: IRS (tax administration and enforcement), Treasury Department (revenue and fund transfers), and Social Security Administration (protected trust funds).
• Taxpayers Generally: Indirectly affects all via potential federal budget pressures from lost revenue.

Notable Legal, Constitutional, or Political Implications

• Legal Implications: Relies on Congress's broad authority under the U.S. Constitution (Article I, Section 8) to levy and regulate taxes. The phase-out uses existing MAGI definitions from other tax credits (e.g., for education), ensuring consistency. Potential for IRS guidance on "election" processes and audits to verify 2,080-hour threshold.
• Constitutional Implications: None significant; tax exclusions are common and do not infringe on rights like equal protection, though it may raise questions of fairness for non-hourly workers (salaried or gig economy participants not explicitly covered).
• Political Implications: Positions as pro-worker relief amid economic pressures like inflation, but could spark debate on fiscal responsibility (revenue loss estimated in billions over 5 years) and equity (benefits skewed toward traditional hourly jobs). The 5-year sunset allows for future review or extension based on economic conditions.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Bacon, Don [R-NE-2]

Recent Actions

• 2025-01-20: Referred to the House Committee on Ways and Means.
• 2025-01-20: Introduced in House
• 2025-01-20: Introduced in House

Bill Versions

• Second Job Tax Relief Act of 2025 — issued 2025-01-20 — PDF (5 pages)