How overtime pay works
Under the federal Fair Labor Standards Act, non-exempt employees must be paid at least 1.5 times their regular rate for hours worked beyond 40 in a workweek. A $25/hour worker earns $37.50 for each overtime hour. Overtime is counted per week, not averaged: 50 hours one week and 30 the next is 10 overtime hours, even though the two-week average is 40.
Several states go further. California requires daily overtime after 8 hours in a day and double time after 12, and Alaska, Nevada and Colorado have daily overtime rules as well. Union contracts and some employers pay double time for weekends or holidays. Select double time in the calculator for those cases.
Overtime after taxes: better than you think
Overtime is taxed as ordinary wages — but for 2025 through 2028 the overtime premium gets a federal deduction (more below). For a $25/hour worker (about $52,000 a year), the marginal federal rate is 12%, plus 7.65% FICA. Each $37.50 overtime hour nets about $30.13 before the deduction; with the $12.50 premium deducted, it nets about $31.63 in a no-income-tax state. Five overtime hours a week for a year adds $9,750 gross and roughly $8,224 after federal taxes.
The reason overtime checks look heavily taxed is withholding, not tax law. Payroll software treats each check as if you earned that much every period, which pushes an overtime-heavy check into a higher withholding bracket. The over-withholding comes back as a refund when you file. The calculator measures the real tax — the difference in your annual take-home with and without the overtime.
The 2025–2028 overtime deduction
The One Big Beautiful Bill Act lets workers deduct qualified overtime compensation from federal taxable income for tax years 2025 through 2028. 'Qualified' means the premium required by the Fair Labor Standards Act — generally the 'half' of time-and-a-half, or half your regular rate for each overtime hour. Premiums beyond the federal requirement (for example, the extra half of double time, or daily overtime required only by state law) don't count. The deduction is capped at $12,500 per return ($25,000 joint) and shrinks by $100 for every $1,000 of modified adjusted gross income above $150,000 ($300,000 joint).
It's a deduction, not an exemption: overtime still owes Social Security, Medicare and state income tax, and it's still withheld from paychecks. You claim it when you file, without itemizing. Starting with 2026, employers report qualified overtime on the W-2 (box 12, code TT), and the 2026 W-4 lets you account for an expected deduction to reduce withholding. The calculator applies the deduction by default; switch it off to compare.
Who doesn't get overtime
Exempt employees — generally salaried workers above a federal salary threshold whose duties are executive, administrative, professional, computer-related or outside sales — are not owed overtime. Job titles don't decide exemption; actual duties and pay do, and several states set higher salary thresholds than the federal one. Misclassification is common: a salaried 'manager' who mostly does the same work as their team may be owed overtime. Independent contractors aren't covered by overtime law at all, which is one reason contract rates need to be higher than equivalent hourly wages.
Overtime pay
OT pay = hourly rate × multiplier × overtime hours
- Multiplier = 1.5 (time and a half) or 2 (double time)
- Weekly pay = rate × regular hours + OT pay
- OT kept = TakeHome(base + OT) − TakeHome(base)
Common mistakes this calculator helps you avoid
- ✕Averaging hours across two weeks. Overtime is computed per workweek; a 50/30 split still owes 10 overtime hours.
- ✕Judging overtime by the withholding on one check. Look at annual take-home — overtime always nets more per hour than straight time.
- ✕Excluding shift differentials from the regular rate. Bonuses and differentials must be included when computing the overtime rate.
- ✕Accepting comp time instead of pay in the private sector. Comp time in lieu of overtime pay is legal only for public employers.
- ✕Assuming 'no tax on overtime' makes all overtime tax-free. Only the premium portion is deductible, and FICA and state tax still apply.
Key terms
- Qualified overtime
- The FLSA-required overtime premium — half the regular rate per overtime hour — deductible up to $12,500 ($25,000 joint) for 2025–2028.
- Time and a half
- 1.5 times the regular hourly rate — the federal minimum overtime premium.
- Double time
- 2 times the regular rate; required in some state rules (e.g., California after 12 hours a day) and common in union contracts.
- Non-exempt
- Employees covered by overtime law, owed premium pay for hours over 40 in a workweek.
- Regular rate
- The base used to compute overtime, which must include shift differentials and non-discretionary bonuses.
Frequently asked questions
+How do I calculate time and a half?
Multiply your hourly rate by 1.5. $20/hour becomes $30/hour for overtime; $25 becomes $37.50. Multiply by the overtime hours for the overtime pay.
+Is overtime taxed more?
No — and for 2025–2028 it's taxed less. Overtime uses the same brackets as other wages, plus the premium portion is deductible from federal taxable income. It's withheld more aggressively on the check that contains it, and the excess returns at tax time.
+Is there no tax on overtime now?
Partly. For 2025–2028 you can deduct the overtime premium — the 'half' of time-and-a-half — up to $12,500 ($25,000 joint) from federal taxable income. The rest of your overtime pay is taxed normally, and Social Security, Medicare and state tax still apply.
+How much does an overtime hour net at $20 an hour?
About $25.30 for a single filer in a no-income-tax state in 2026, counting the overtime deduction: the $30 rate minus the 12% federal bracket and 7.65% FICA, with the $10 premium deductible. Without the deduction it's about $24.10.
+Do salaried employees get overtime?
Only if they're non-exempt — paid below the salary threshold or in roles that don't meet the duties tests. Many salaried workers are legally owed overtime and don't know it.
+Is overtime calculated daily or weekly?
Federally, weekly — hours over 40 in a workweek. California, Alaska, Nevada and Colorado also require daily overtime after 8 (or 12) hours in a day.