How overtime pay works
The Fair Labor Standards Act (FLSA) requires employers to pay non-exempt employees at least 1.5 times their regular rate for hours worked over 40 in a workweek. A workweek is any fixed, recurring 168-hour period; each week stands alone, so 30 hours one week and 50 the next means 10 overtime hours, even though the two-week average is 40.
| Hours worked | Regular hours | Overtime hours | Pay at $22/hour |
|---|---|---|---|
| 40 | 40 | 0 | $880.00 |
| 45 | 40 | 5 | $1,045.00 |
| 48 | 40 | 8 | $1,144.00 |
| 50 | 40 | 10 | $1,210.00 |
| 60 | 40 | 20 | $1,540.00 |
The “regular rate” must include most non-discretionary pay such as shift differentials and production bonuses, so true overtime pay can be higher than 1.5 × base rate.
State overtime rules
California requires overtime for hours over 8 in a workday as well as over 40 in a week, double time for hours over 12 in a day, and overtime on the seventh consecutive workday. A few other states have their own daily or weekly rules. Where state law is more generous, it applies — this calculator uses only the federal weekly rule, so enter your total weekly hours and treat the result as a minimum.
The 2025–2028 overtime deduction
For tax years 2025 through 2028, workers can deduct qualified overtime compensation from federal taxable income. Qualified overtime is only the premium portion the FLSA requires — the extra half of time-and-a-half — not your full overtime pay. At $22 an hour, each overtime hour pays $33, of which $11 is qualified.
From our federal dataset: the deduction is capped at $12,500 ($25,000 for joint filers) and phases out above $150,000 of income ($300,000 joint), reduced by 10% of income above that point. Married couples must file jointly to claim it.
The deduction lowers federal income tax only. Overtime is still subject to Social Security and Medicare, and most states tax it normally. Your employer may not reduce withholding for it during the year, so the saving often arrives as a larger refund.
Worked example
$22 an hour, 48 hours a week for 50 weeks (40 hours in the other 2), single, no state income tax — the calculator’s default:
| Item | Amount |
|---|---|
| Weekly pay: 40 × $22 + 8 × $33 | $1,144.00 |
| Annual gross pay | $58,960 |
| Overtime pay in the year (8 h × $33 × 50 weeks) | $13,200 |
| Qualified premium (8 h × $11 × 50 weeks) | $4,400 |
| Overtime deduction after cap and phase-out | $4,400 |
| Federal income tax without / with the deduction | $4,895 / $4,367 |
| Estimated federal tax saving | $528 |
Exempt or non-exempt?
Whether you earn overtime depends on your FLSA status, not on whether you are called “salaried.” Most hourly employees are non-exempt. Salaried employees are exempt only if they are paid at least the federal salary threshold and their main duties meet the executive, administrative, professional, computer or outside-sales tests. Some workers, such as certain agricultural and transportation employees, have special rules. If you are unsure, the U.S. Department of Labor’s Wage and Hour Division publishes fact sheets for each exemption.
Comp time instead of overtime pay
Private-sector employers generally cannot give “comp time” off instead of paying overtime to non-exempt employees. Public-sector employers can, within limits. Comp time has no tax effect until it is paid out.
Overtime and your 401(k)
If you contribute a percentage of pay to a 401(k), most plans apply it to overtime too, which lowers the immediate take-home from overtime but also lowers income tax on it. Use the paycheck calculator in hourly mode with your overtime hours and 401(k) percentage to see the combined effect.
Why overtime paychecks look heavily taxed
Payroll software withholds each paycheck as if you earned that amount all year. A week with lots of overtime is treated as a higher annual income, so more is withheld than you will finally owe on it. The excess comes back when you file. The “take-home added by overtime” figure in the calculator is based on annual liability, not on that temporary over-withholding.
Estimates only. Your employer’s regular-rate calculation, state law and W-4 determine actual pay and withholding.