Who is entitled to overtime pay?

Most hourly workers and salaried employees earning less than $684/week ($35,568/year) are entitled to federal overtime under the FLSA. To be exempt from overtime, you must meet the salary basis test, the salary level test, and the duties test (executive, administrative, or professional duties).

How is overtime calculated?

Overtime is 1.5× your regular rate of pay for hours over 40 in a workweek. Your regular rate includes your base hourly wage plus non-discretionary bonuses and other forms of compensation. It does not include discretionary bonuses or expense reimbursements.

Is overtime taxed at a higher rate?

No. Overtime is taxed as ordinary income at your marginal rate. More tax may be withheld from overtime paychecks because withholding tables annualize your pay — but your actual tax bill at filing is the same. Any extra withholding comes back as a refund.

Do any states have daily overtime rules?

Yes. California requires overtime after 8 hours in a single day and double time after 12 hours. Alaska and Nevada also have daily overtime provisions. These state rules are in addition to federal weekly overtime — your employer must apply whichever rule (state or federal) gives you more pay.

Overtime Pay Rules (FLSA): What You're Owed and When

The FLSA Overtime Rule

Under the Fair Labor Standards Act (FLSA), most hourly and non-exempt workers must be paid at least 1.5× their regular rate of pay for every hour worked beyond 40 in a single workweek. This is federal law — it applies across all industries and all states. "Workweek" is any fixed 7-day period defined by your employer; it doesn't have to align with the calendar week.

Overtime is calculated weekly, not daily (with exceptions) and not based on two-week periods. If you work 50 hours one week and 30 the next, you're owed 10 hours of overtime for week one — even though your two-week total is only 80 hours.

State Overtime Rules: Often More Generous

Some states go beyond federal minimums. California requires daily overtime: 1.5× for hours over 8 in a single day, double time for hours over 12 in a day, and double time for the first 8 hours on a 7th consecutive day of work in a workweek. Alaska and Nevada also have daily overtime rules. Colorado requires daily overtime for hours over 12. Your employer must apply whichever standard — state or federal — is more generous to you.

Who Is Exempt from Overtime?

Three tests must all be met to be classified as exempt: (1) Salary basis test: you receive a predetermined salary that doesn't vary based on hours worked. (2) Salary level test: you earn at least $684/week ($35,568/year) as of 2025. (3) Duties test: your primary job duties fall into executive, administrative, or professional categories as defined by the FLSA.

Common exempt roles: managers who supervise 2+ employees and have authority over hiring/firing, HR professionals, lawyers, accountants, engineers. Job title alone doesn't determine exempt status — your actual duties matter. Misclassification is the most common wage theft issue in the US.

If you're misclassified: You may be owed back overtime for up to 2 years (3 years for willful violations). The FLSA allows you to file a complaint with the DOL or sue directly. Many employment attorneys take these cases on contingency.

How Your Regular Rate Is Calculated

Your overtime rate is 1.5× your "regular rate" — which isn't simply your hourly wage. The regular rate includes most forms of compensation: your base hourly rate, non-discretionary bonuses (production bonuses, attendance bonuses, longevity pay), shift differentials, and certain commissions. It excludes: discretionary bonuses (holiday gifts), overtime premiums already paid, expense reimbursements, and certain profit-sharing payments. If your employer pays you a bonus that should be included in your regular rate but isn't, your overtime pay is being calculated incorrectly.

How Overtime Is Taxed

Overtime pay is taxed as regular income — there is no special overtime tax rate. However, you might notice more withholding on an overtime week. This happens because IRS withholding tables annualize each paycheck: if your regular paycheck annualizes to $60,000 and your overtime paycheck annualizes to $75,000, the latter will have withholding appropriate for a $75,000 earner. Your actual tax bill is calculated on your total annual income when you file. Any over-withholding during overtime weeks will come back as a refund.

This guide is for informational purposes only and does not constitute tax, legal, or financial advice. Tax laws change frequently. Consult a qualified tax professional for advice specific to your situation.