Is Overtime Worth It?

Not exactly. Overtime isn't taxed at a special higher rate. However, the extra income can push you into a higher marginal tax bracket, so you may pay more tax on that additional income. Together, federal tax, state tax and FICA often take 20-40% of overtime pay. For 2025 to 2028, US workers can also deduct the half-time premium the FLSA requires (up to $12,500, or $25,000 on a joint return) from federal income tax, and this calculator includes that.

Your employer withholds taxes based on annualized income. When you earn overtime, the payroll system assumes you'll earn that much every pay period, so it withholds more. You may get some back as a tax refund, but the net effect is that overtime is taxed at your marginal rate.

In the US, the Fair Labor Standards Act (FLSA) requires non-exempt employees to receive 1.5x their regular rate for hours worked over 40 in a workweek. Some states have additional requirements. Exempt employees (salaried) typically don't receive overtime pay.

It depends on your tax situation, but many people keep 60-80% of their overtime pay. Federal income tax (10-37%), state income tax (0-13%), Social Security (6.2%), and Medicare (1.45%) all take a cut, though the federal overtime deduction shelters the half-time premium from income tax. In the UK, income tax and National Insurance (8%, or 2% above £50,270) take the cut. Use our calculator to see your exact amount.

It can. If overtime pushes your annual income into a higher bracket, the portion above the bracket threshold is taxed at the higher rate. But remember: only the income above the threshold is taxed higher, not all your income. This is how marginal tax brackets work.

Consider if overtime isn't worth it when: (1) your effective after-tax rate is close to or below your regular rate, (2) it significantly impacts your health or relationships, (3) you could earn more per hour doing something else, or (4) the extra income pushes you into benefit phase-outs (like student loan repayment plans).

In the US, the federal overtime deduction (2025 to 2028) already removes income tax on the required half-time premium, up to $12,500 ($25,000 joint), with less above $150,000 of income ($300,000 joint). Beyond that you can: (1) contribute more to pre-tax retirement accounts to lower your taxable income, (2) time overtime to avoid income spikes that trigger higher withholding, (3) adjust your W-4 if you're over-withholding, (4) use HSA contributions if eligible.

Yes, but not twice as good after taxes. With this calculator's defaults ($25/hr, $52,000 a year, single, 5% state tax), time and a half pays $37.50/hr gross and about $30/hr net. Double time pays $50/hr gross and about $38/hr net. Only the half-time premium qualifies for the federal overtime deduction, so the extra half hour of pay is fully taxed.