How overtime pay works
Under the federal Fair Labor Standards Act, most hourly workers must get at least 1.5 times their regular rate for every hour over 40 in a workweek. That's "time and a half." At $20 an hour, each overtime hour pays $30.
The 40 hours are counted per workweek, not per pay period. If you're paid every two weeks and work 50 hours one week and 30 the next, you're still owed 10 hours of overtime for the first week.
Some states go further. California, for example, requires overtime after 8 hours in a day and double time after 12. Salaried workers who meet certain pay and job-duty tests are "exempt" and don't get overtime. Check your state's labor department if you're not sure which rules cover you.
No tax on overtime: what it really means
A federal tax deduction for overtime started in 2025 and runs through 2028. It doesn't make all your overtime tax-free. It only covers the extra "half" in time and a half that federal law requires: on a $30 overtime hour at a $20 base rate, that's $10.
- You can deduct up to $12,500 a year ($25,000 if married filing jointly).
- It phases out for incomes over $150,000 ($300,000 joint).
- You still pay Social Security and Medicare tax on it, and state tax rules vary.
- Overtime that only your state or union contract requires doesn't count, and neither does extra pay beyond what federal law requires (like the second half of double time).
The calculator shows that premium so you know roughly what may be deductible. You claim it when you file, so it doesn't change your paycheck unless you update your W-4. Details are on the IRS's overtime deduction page.
Common questions
What is time and a half for $20 an hour?
$30 an hour. Multiply your hourly rate by 1.5.
How much is 10 hours of overtime at $18 an hour?
$270. Time and a half is $27 an hour, times 10 hours.
Why does my overtime check look like it got taxed more?
Overtime is taxed like any other wages. A bigger paycheck can look like it's taxed at a higher rate because withholding is figured as if you earned that much every pay period. If too much was withheld, it comes back to you as a refund when you file.