How overtime pay works
Under the Fair Labor Standards Act, non-exempt employees must be paid at least 1.5 times their regular rate for hours worked over 40 in a workweek. At $20 an hour that is $30 for each overtime hour. Several states add daily overtime (for example California after 8 hours in a day and double time after 12) — see our overtime and taxes guide and the pay-rules section of each state page.
Overtime is added to your gross pay for the period and withheld like the rest of your wages: federal income tax, 6.2% Social Security, 1.45% Medicare and any state and local tax. Nothing about the rate changes; what changes is how much of your income sits in a higher bracket.
How much of overtime you keep: a $20-an-hour worker
Single filer, 40 regular hours a week plus overtime at 1.5×. “Kept” is the extra annual take-home compared with no overtime.
| State | Overtime / week | Gross overtime / year | Kept / year | Share kept |
|---|---|---|---|---|
| Texas | 5 hours | $7,800 | $6,267 | 80.4% |
| Texas | 10 hours | $15,600 | $12,535 | 80.3% |
| Texas | 15 hours | $23,400 | $18,802 | 80.4% |
| California | 5 hours | $7,800 | $5,809 | 74.5% |
| California | 10 hours | $15,600 | $11,507 | 73.8% |
| California | 15 hours | $23,400 | $17,170 | 73.4% |
| New York | 5 hours | $7,800 | $5,812 | 74.5% |
| New York | 10 hours | $15,600 | $11,625 | 74.5% |
| New York | 15 hours | $23,400 | $17,437 | 74.5% |
Run your own rate, hours and state in the calculator above; the “Your overtime, separated” table shows the premium and the tax. For all of your pay together, use the paycheck calculator.
The 2025–2028 federal overtime deduction
Under the One, Big, Beautiful Bill Act, you may deduct qualified overtime compensation — the amount above your regular rate — up to $12,500 ($25,000 on a joint return), phasing down above $150,000 of modified adjusted gross income ($300,000 joint). It is claimed on your tax return, so paycheck withholding does not fall automatically unless you give your employer an updated Form W-4. Federal overtime is still subject to Social Security and Medicare.
How this estimate works
The calculator annualizes your weekly pay (rate × hours plus rate × overtime hours × 1.5, over 52 weeks), applies IRS Publication 15-T for federal withholding, FICA, and your state’s 2026 rules, then compares take-home with and without overtime to show what overtime really adds. See the methodology. Local taxes and the year-end overtime deduction are not included.
Frequently asked questions
Is overtime taxed at a higher rate?
No. Overtime is ordinary income taxed at the same brackets as your regular pay. It can look more heavily taxed on one paycheck because payroll withholding assumes a bigger check will repeat all year; your real tax is settled when you file.
How is overtime pay calculated?
For non-exempt employees, federal law requires at least 1.5 times your regular rate for hours over 40 in a workweek. At $20 an hour, overtime pays $30 an hour. Some states also require daily overtime or double time.
How much of my overtime do I keep after tax?
It depends on your bracket and state. For a single filer earning $20 an hour, the calculator shows about 80 cents of each overtime dollar kept in a state with no income tax and roughly 73 to 75 cents in California or New York.
Do Social Security and Medicare apply to overtime?
Yes. Overtime wages are subject to 6.2% Social Security (up to the $184,500 wage base in 2026) and 1.45% Medicare, like all wages.
Is there a federal tax deduction for overtime?
For tax years 2025 through 2028 you may deduct up to $12,500 ($25,000 on a joint return) of qualified overtime — the “half” in time-and-a-half — subject to income limits. It is claimed on your return and does not change normal paycheck withholding unless you update your W-4.
Do salaried employees get overtime?
Exempt employees, typically salaried workers who meet salary and job-duty tests, are not entitled to overtime. Non-exempt employees are, even if they are paid a salary.
Sources & methodology
- U.S. Department of Labor — Overtime pay
- IRS — Questions and answers about the qualified overtime compensation deduction
- IRS — Publication 15-T (2026), Federal Income Tax Withholding Methods
- U.S. Department of Labor — State minimum wage laws (overtime notes)
Estimates for information only, not tax advice. See our methodology, disclaimer and editorial policy.