What Happens to Overtime Pay After Taxes in 2026
Overtime pay is not taxed at a special "overtime rate." It is taxed as ordinary income at your marginal federal tax bracket, plus applicable state income tax and FICA. However, because overtime pushes your total income higher in the pay period it is paid, withholding may appear heavier than normal.
Key Findings
- Overtime is ordinary income, not a separate tax class.
- Only the added dollars are taxed at the higher marginal rate.
- Payroll withholding can look heavy because it annualises the pay period.
Example overtime math
| Base rate | State | Additional gross | Federal | State | FICA | Net OT pay |
|---|---|---|---|---|---|---|
| $18 | TX | $2,700 | $324 | $0 | $207 | $2,169 |
| $18 | CA | $2,700 | $324 | $154 | $207 | $2,016 |
| $18 | NY | $2,700 | $324 | $160 | $207 | $2,009 |
| $25 | TX | $3,750 | $450 | $0 | $287 | $3,013 |
| $25 | CA | $3,750 | $450 | $296 | $287 | $2,717 |
| $25 | NY | $3,750 | $450 | $222 | $287 | $2,791 |
| $35 | TX | $5,250 | $1,155 | $0 | $402 | $3,693 |
| $35 | CA | $5,250 | $1,155 | $530 | $402 | $3,163 |
| $35 | NY | $5,250 | $1,155 | $311 | $402 | $3,382 |
The common misconception
Many workers believe a raise or overtime pushes all of their income into a higher bracket. In reality, only the dollars earned above the bracket threshold are taxed at the higher rate. Your prior income is unaffected.