How overtime is taxed in 2026
Overtime pay is regular wages. Federal income tax, Social Security, Medicare and state tax all come out of it. The "no tax on overtime" deduction helps on your return, not on the paycheck.
On the paycheck
Overtime is added to gross pay. Because payroll software withholds as if each check repeats for the year, a week with heavy overtime can look as if it was taxed at a high rate. It is not a separate rate; the difference is refunded or settled when you file.
Social Security (6.2%) and Medicare (1.45%) apply to every overtime dollar. Try your own hours in the overtime calculator.
On your tax return
The 2025 tax law created a deduction for qualified overtime compensation. It covers only the premium above your regular rate, the extra half in time and a half. The cap is $12,500, or $25,000 for married filing jointly, and it shrinks for income over $150,000 ($300,000 joint). Estimate yours with the no tax on overtime calculator.
Example: $25 an hour with 5 overtime hours a week. The premium is $12.50 × 5 × 52 = $3,250 a year, so the deduction is $3,250, not the whole $9,750 of overtime pay.
Watch it worked through
- Overtime Tax: Is Overtime Taxed More? (YouTube Short)
Paycheck Zip videos use the same calculator as this page. Figures in a video are from the day it was made; the page is kept current.
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Questions
Is overtime taxed more than regular pay?
No. It is taxed at the same rates. A bigger paycheck can look like a higher rate because withholding assumes the pay repeats all year.
Is there no tax on overtime now?
There is a federal deduction for qualified overtime premium pay, capped at $12,500 ($25,000 joint), claimed on the return. FICA still applies.
Does double time qualify in full?
Only the half-time premium required by federal law counts toward the deduction.
Can I lower withholding for it?
The 2026 Form W-4 deductions worksheet has a line for expected qualified overtime, which can raise Step 4(b).