How Overtime Pay Works in the U.S.
Who gets overtime, how time-and-a-half is calculated, which states add daily overtime and what the new overtime tax deduction means.
- Updated
- By the PaydayMath team · how we work
Overtime rules in the U.S. come from a 1938 law, the Fair Labor Standards Act (FLSA), plus extra rules in some states. The basic idea is simple: most hourly workers earn at least one and a half times their regular rate for every hour over 40 in a workweek. The details, who qualifies, what counts as a week and which states pay more, are where most paycheck mistakes happen.
Who gets overtime
Workers are either non-exempt (covered by overtime rules) or exempt. Being paid a salary does not by itself make you exempt. To be exempt as an executive, administrative or professional employee, you generally must:
- be paid a fixed salary that does not drop when you work fewer hours,
- earn at least the federal minimum salary for exemption ($684 a week, or $35,568 a year, under the rule the Department of Labor currently enforces), and
- mainly do the kind of work the exemption describes, such as managing people or work that requires advanced knowledge.
Some states set a higher salary threshold. California and New York, for example, tie it to their minimum wage, so a salaried worker earning less than that is owed overtime there. Independent contractors are not covered by overtime law, but being labeled a contractor does not make you one if the employer controls how and when you work.
How time-and-a-half is calculated
Overtime pay = hours over 40 × regular rate × 1.5.
Example: you earn $20 an hour and work 46 hours in a week. You get 40 × $20 = $800, plus 6 × $30 = $180 of overtime, for $980 in total.
The "regular rate" can be more than your hourly wage
The regular rate includes most other pay for the week: shift differentials, production bonuses, attendance bonuses and commissions. If you earned a $100 production bonus in that 46-hour week, your regular rate becomes ($920 + $100) ÷ 46 = $22.17, and each overtime hour must be paid at least $33.26, not $30. Gifts, holiday bonuses that are not promised in advance and expense reimbursements are left out.
A workweek is fixed and stands alone
Your employer sets a fixed, recurring 168-hour period (for example, Sunday 12:00 a.m. to Saturday 11:59 p.m.). Overtime is counted inside each one. Hours cannot be averaged across two weeks: working 50 hours one week and 30 the next still earns 10 hours of overtime, even on a biweekly paycheck. Paid holidays, vacation and sick days usually do not count toward the 40 hours, because they are not hours worked.
States with daily overtime
Federal law has no daily limit, so a 12-hour shift is not overtime by itself. A few states go further:
| State | Daily overtime rule |
|---|---|
| California | 1.5× after 8 hours a day, 2× after 12 hours, and overtime on the 7th consecutive day |
| Alaska | 1.5× after 8 hours a day (employers with 4 or more employees) |
| Nevada | 1.5× after 8 hours in a 24-hour period, if you earn less than 1.5 times the state minimum wage |
| Colorado | 1.5× after 12 hours a day |
When both daily and weekly rules apply, the employer pays whichever gives you more, without paying the same hour twice. Our overtime calculator applies this automatically for each state.
Overtime and taxes
Overtime pay is regular wages for withholding: federal and state income tax, Social Security and Medicare are all taken out. A big overtime week can push one paycheck's withholding up, for the same reason a bonus can.
Starting with tax year 2025, a federal law (Public Law 119-21) lets eligible workers deduct qualified overtime pay on their income tax return through 2028. The deduction covers the premium part of the pay, the extra "half" in time-and-a-half required by the FLSA, up to $12,500 a year ($25,000 for married couples filing jointly). It shrinks for incomes over $150,000 ($300,000 joint). It does not reduce Social Security or Medicare, and it is claimed when you file, so your paycheck withholding does not change unless you adjust your W-4.
Common overtime mistakes
- Paying a "flat" salary to a worker who does not meet the exemption tests.
- Leaving bonuses out of the regular rate.
- Moving extra hours to the next pay period, or offering comp time instead of pay (private employers cannot do this).
- Not counting work done before clocking in or after clocking out, such as required security checks or answering work messages.
If you think you were underpaid, keep your own record of hours and contact the Department of Labor Wage and Hour Division or your state labor department. Back wages can generally be claimed for two years, or three if the violation was willful.
More guides
- Why Is My Bonus Taxed So High?
- How to Read Your Pay Stub
- How to Calculate Hours Worked for Payroll
- Hourly vs. Salary: How to Compare Job Offers
This guide is general information about U.S. payroll rules, not tax or legal advice. Rules change and your situation may differ; check with your employer, your state labor department or a tax professional.