ALABAMA (WHNT) – An Alabama bill that allows workers to keep more of the money they earn on overtime wages has officially been signed into law.

HB217, sponsored by Alabama House Minority Leader Anthony Daniels, has now been signed into law by Governor Kay Ivey.

The bill eliminates the state’s 5% tax on overtime pay, or state income tax for hours worked above 40 in a week by hourly waged workers.

“This was a central component to our legislative agenda, the ‘Plan for Prosperity’ to help the people of Alabama as they continue to deal with inflation and economic uncertainty,” Daniels said. “I believe that this will not only allow hard-working Alabamians to keep more of what
they earn, but it will also help businesses by helping them retain employees in a tight labor

HB217 received unanimous and bipartisan support in both chambers.

The state will allow the law to go into effect for the next 18 months before evaluating its effect on state revenue.