Working overtime can mean extra money to reach your financial goals, support your family, and enjoy leisure time. But just like your regular wages, you must pay taxes on your overtime pay. 

Learn about the taxes you may have to pay on your overtime wages to answer the questions, is overtime taxed more, and how much overtime you need to work to make the extra hours worth your time.

Does Overtime Work Get Taxed More?

Short answer, no. The rate you are taxed remains the same whether you work standard or overtime hours.

The confusion arises when the income you earn working overtime pushes you into a higher tax bracket. The IRS uses your gross income, the total income you make before deductions and taxes, to determine your tax bracket. The higher your tax bracket the higher your income, and the more taxes you will pay. In other words, the rate you are taxed increases as your income increases.

For the 2022 tax year, there are seven tax brackets for ordinary income. These brackets apply to the taxes you’ll file in April 2023. 

For example, if, as a single taxpayer, you make $80,000 in 2022, you will be taxed at a rate of 22%. If you work overtime and end up with a gross income of $90,000, you move up a tax bracket and are taxed at a higher rate of 24%.

Your overtime wages are taxed at the same rate as your regular wage bracket (10% for the lowest income and 37% for the highest income), no matter how many hours each week you work. Employers must withhold taxes from the paychecks of salaried employees as determined by the IRS tax tables.

For example, if you fall into the 24% tax bracket and work overtime for $100, your employer must withhold $24 (.24 x $100 = $24) because of federal income taxes.

While withholding tax is calculated the same way for overtime and regular pay, the additional income could increase your gross revenue and push you into a higher wage bracket.

For example, you may earn an annual salary of $88,725 within the 22% tax bracket. Working hours of overtime could raise your estimated yearly salary past $89,075, meaning your paycheck would be taxed at 24%.

How Overtime is Calculated

The Fair Labor Standard Act (FLSA) mandates that, unless exempt, employees receive overtime pay for any hours they work in a week after 40 hours. The overtime rate they receive cannot be less than 1.5x their regular pay rate (time and a half).

If an hourly employee works more than 40 hours in a work week, they must receive at least time and a half payment for each additional hour.

You can calculate your overtime rate by multiplying your regular wage by 1.5 and then multiplying the result by the number of hours you worked overtime.

Overtime pay = (1.5) x (# overtime hours)

Under FLSA, employees must receive overtime wages after working over 40 hours a week, regardless of how you split that time up across the week. Some states also have daily overtime laws, which allow employees to receive overtime for working many hours in a single day.

If you live in Alaska, Nevada, Puerto Rico, or the District of Columbia, you get paid at an overtime rate after working 8 hours in a single day. If you live in Arkansas or Colorado, you receive overtime after 12 hours of daily work, and California offers overtime rates after 15 hours of daily work. 

If you are salaried, you are not automatically exempt from overtime wages. For example, if you receive a salary of less than $684 per week, you are non-exempt, and your employer must pay you overtime.