You picked up extra shifts, the paycheck is bigger — and somehow it feels like the government took a disproportionate cut. This is one of the most persistent myths in personal finance: that overtime is 'taxed more.' It isn't. Let's clear it up and show you what you really keep.
Run your week through the overtime pay calculator for an instant estimate.
How overtime is calculated
Under the federal Fair Labor Standards Act, non-exempt employees must be paid at least 1.5× their regular hourly rate for hours worked beyond 40 in a workweek. Some employers or states offer double time in certain situations.
Example at $25/hour: 40 regular hours = $1,000. 8 overtime hours at $37.50 = $300. Gross for the week = $1,300.
Who qualifies for overtime
Overtime rules apply to non-exempt workers. Many salaried roles are 'exempt' (executive, administrative, professional) and aren't entitled to overtime, though rules depend on duties and a salary threshold. Hourly workers are typically non-exempt.
Is overtime taxed more? (No.)
Overtime dollars are ordinary income. They go through the same brackets and the same FICA as your regular pay. There is no separate, higher 'overtime tax rate.' A dollar of overtime is taxed identically to a dollar of regular wages at the same income level.
So why does a big week look over-taxed?
Withholding, again. Payroll systems often calculate withholding by annualizing the current check. A week with lots of overtime looks — to the software — like you suddenly earn that much every week, so it withholds at a higher rate for that check.
You haven't lost the money. When you file, your real annual income determines your real tax, and any over-withholding returns as part of your refund. The check just front-loaded the estimate.
Frequently asked questions
Get an instant estimate with the overtime pay calculator.
Is overtime taxed at a higher rate?
No. Overtime is ordinary income taxed like the rest of your wages. A big week can look over-taxed because payroll temporarily withholds as if every week were that large.
How is overtime pay calculated?
Federal law requires at least 1.5× your regular rate for hours worked over 40 in a workweek, for non-exempt employees.
Why was so much withheld from my overtime check?
Withholding software often annualizes a large check, briefly pushing it into a higher withholding bracket. It evens out when you file.