Free Overtime Tax Calculator

Overtime pay is calculated at 1.5x your regular hourly rate for hours worked beyond 40 in a week — that's the federal standard under the Fair Labor Standards Act. So if you make $30/hour, your OT rate is $45/hour. Sounds great until you see the taxes. Overtime is taxed as ordinary income at your marginal federal rate, plus FICA (7.65%), plus state income tax. For someone in the 22% federal bracket in a state like Illinois, the combined hit on OT earnings can approach 35%. That $45/hour OT becomes more like $29/hour after taxes.

Here's the thing most people miss: overtime gets taxed at your marginal rate, not your effective rate. Your effective rate is the blended average across all brackets. But OT income stacks on top of your regular income, so it fills the highest bracket first. If your regular salary puts you at the top of the 12% bracket, every OT dollar is taxed at 22% federally. That's a big jump. Still, even at a higher tax rate, overtime puts more money in your pocket — just not as much as the gross number suggests.

Some states have proposed eliminating state income tax on overtime pay, but as of 2026, no state has enacted such a law. Federal tax on overtime remains unchanged. Your best strategy is knowing your marginal rate before you volunteer for extra shifts so you can make an informed decision about whether the after-tax pay is worth the extra hours.

A quick example: earning $20/hour with 10 hours of OT per week means an extra $300/week in gross OT pay. In a 22% federal bracket with 7.65% FICA and no state tax, you'd keep about $211 of that $300. In Illinois with 4.95% state tax, you'd keep about $196. Over a year of consistent OT, that's $10,000–$11,000 extra take-home — real money, but significantly less than the $15,600 gross.