How Overtime Is Taxed (With Example)
Overtime has no special tax rate. See why overtime checks can look smaller and how much of $330 in extra pay you keep, with a worked example.
By Farrow (pseudonym; identity and professional credentials are not disclosed) · November 8, 2026. This guide is educational information, not tax advice.
Overtime is taxed the same way as the rest of your pay. There is no special overtime tax rate, but a big overtime check can still look smaller than you expected. Here is why, and how much of the extra money you actually keep.
Overtime is ordinary income
Federal income tax is progressive, so extra earnings are taxed at your top bracket, the rate on the last dollars you earn. Overtime does not push your earlier dollars into a higher bracket. It only adds income on top. Social Security (6.2%) and Medicare (1.45%) also apply to overtime, which together make up the 7.65% payroll tax.
A worked example: 10 hours at time and a half
Say you earn $22 an hour and work 40 regular hours plus 10 overtime hours in a week. Overtime pays 1.5 times your rate, so each overtime hour is $33.
- Regular pay: 40 × $22 = $880
- Overtime pay: 10 × $33 = $330
- Gross for the week: $1,210
If your top bracket is 12%, federal tax on the extra $330 is about $39.60. Payroll tax is $330 × 7.65% = about $25.25. That leaves about $265.15 of the $330, or roughly 80%. State and local taxes, if you have them, reduce it further.
Why the overtime check looks smaller
Employers withhold as if each paycheck's pay repeats all year. A week with extra overtime looks like a much higher annual income, so more tax may be withheld that week. Any over-withholding comes back as part of your refund when you file, because your yearly tax is based on what you earned over the whole year, not one week.
The overtime deduction
Federal law currently includes a deduction for qualified overtime pay, limited to the premium portion (the extra half-time) and capped at an annual amount, with income phase-outs. The rules and dates are specific, so check the current IRS guidance for the tax year you are filing before counting on it.
Estimate your overtime earnings with the overtime pay calculator, see take-home pay with the hourly paycheck calculator, and read how paycheck withholding works for the full picture. Results are estimates, not tax advice.