Is overtime taxed more?

Updated October 8, 2026 · WageSignals

Overtime has no special tax rate, but less of it reaches you than you expect. At $22 an hour, 6 overtime hours add $198.00 to gross pay and $159.09 to your pocket: 80.3%.

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How overtime is calculated

Federal law requires at least 1.5 times your regular rate for every hour over 40 in a workweek. At $22 an hour, each overtime hour is worth $33.

It is counted per week, not per pay period: working 45 hours one week and 35 the next is 5 overtime hours, even though the biweekly total is 80.

Some states give more. California also pays 1.5× after 8 hours in a day, and double after 12.

Why it looks like more is taken

Overtime is added to your pay for the period and federal withholding is figured on the total. Because the system uses brackets, those extra dollars land in the highest bracket you reach and pay a higher percentage than your average.

In the example, your normal check keeps 85.1% of gross, but the overtime keeps only 80.3%.

What "no tax on overtime" means

From 2025 through 2028 you can deduct from federal income tax the extra half of your overtime: the $11 an hour in the example, not the full $33. The cap is $12,500 a year ($25,000 if married filing jointly), if your total income is under $150,000 ($300,000 if married).

It does not lower your paycheck automatically. The benefit comes when you file, unless you enter the deduction in Step 4(b) of your W-4 to get it in each paycheck.

Social Security and Medicare are still withheld from overtime, and your state may still tax it.

Who does not get overtime

"Exempt" employees: generally salaried administrative, executive or professional roles that meet the legal tests. If you are paid hourly, you almost always qualify.

Frequently asked questions

Is working overtime worth it?

You always earn more: you never end up with less money for working extra hours. A smaller share of each extra dollar reaches you than from your normal pay, that is all.

How much is overtime in Texas or Florida?

The same as the federal rule: 1.5 times your rate after 40 hours a week. Those states add no rules of their own.

Official sources

General information, not tax or legal advice.