Is overtime taxed?
Yes. Overtime is ordinary pay, and it is taxed like ordinary pay. What changed is a federal deduction that can lower the income tax on part of it.
Three taxes, three answers
| Tax | On overtime? | Does the new deduction change it? |
|---|---|---|
| Federal income tax | Yes | It can lower the tax figured on your return |
| Social Security and Medicare (FICA) | Yes | No |
| State income tax | Usually | Depends on your state |
What counts as qualified overtime
Only the part of overtime pay that federal law requires and that is above your regular rate: for time-and-a-half, the extra half. Overtime a company pays above what the Fair Labor Standards Act requires (a double-time rate, for instance) does not count for the extra part. Salaried workers who are exempt from FLSA overtime have no qualified overtime.
Try your numbers
The no tax on overtime calculator works from your W-2 or from your hours. The overtime tax calculator shows what is withheld from the paycheck compared with what may come back at filing.
Sources
- IRS: What to know about the No Tax on Overtime deduction
- IRS FS-2026-13: Questions and answers about the qualified overtime compensation deduction
- Schedule 1-A (Form 1040), 2025
- IRS: Tax deductions for working Americans and seniors
Last checked . Figures follow the IRS pages above; the law can change, so confirm on irs.gov before you file. This site gives estimates, not tax advice.
Questions
Is overtime taxed?
Yes. Overtime is wages. It is subject to federal income tax withholding, Social Security and Medicare tax, and usually state income tax. A federal deduction for qualified overtime (tax years 2025 to 2028) can lower the income tax owed on part of it.
Is overtime taxed at a higher rate?
No. There is no separate overtime tax rate. A bigger paycheck can push withholding up because payroll systems annualize your pay, but your actual tax is figured on your total yearly income.
Does the deduction apply to Social Security and Medicare tax?
No. It is an income tax deduction on Form 1040. Payroll taxes are unchanged.
Does my state follow the federal deduction?
It depends on the state. See the page on state taxes and check with your state tax agency.
Is there a deduction for tips and car loans too?
Yes, separate ones, each with its own cap: up to $25,000 for qualified tips and up to $10,000 for car loan interest on a qualifying new vehicle. Each has its own calculator on this site.
What about the deduction for seniors?
Separate from overtime: people 65 or older may claim up to $6,000 each for tax years 2025 to 2028, phasing out above MAGI of $75,000 ($150,000 joint) at 6 cents per dollar, per the 2025 Schedule 1-A. The IRS page on these deductions has the details.