Overtime Pay and Taxes: How Much Will You Actually Keep?
Many workers believe overtime is taxed at a higher rate than regular pay. While your overtime paycheck may look like more was taken out in taxes, the reality is more nuanced. Understanding how withholding works on overtime will help you see the full picture.
Is Overtime Taxed Differently?
No. Overtime pay is taxed at the same rates as regular income. The confusion arises because of how payroll withholding works. When you receive a larger paycheck due to overtime, your employer's payroll system withholds taxes as if you earned that higher amount every pay period, which can result in higher withholding.
Why Your Overtime Check Looks Smaller
- Payroll systems annualize each paycheck to estimate your annual income
- A bigger paycheck makes the system assume you earn more all year
- This pushes more of the check into a higher withholding bracket
- The excess withholding is returned to you as a refund when you file
FICA Taxes on Overtime
Social Security tax (6.2%) and Medicare tax (1.45%) apply to overtime pay just like regular wages. If your total earnings exceed the Social Security wage base ($176,100 in 2025), overtime earned above that threshold is not subject to Social Security tax but still owes Medicare tax.
How to Estimate Your True Overtime Take-Home
- Determine your marginal federal tax bracket
- Add your state income tax rate
- Add 7.65% for FICA (or 1.45% if above Social Security wage base)
- Your take-home is roughly overtime pay minus those combined percentages
For most workers in the 22% federal bracket with a 5% state tax, overtime take-home is roughly 65% of gross overtime pay after federal, state, and FICA taxes.
