Overtime Tax Rate California: Overtime Pay and Taxes in 2025

Overtime pay in California is taxed like regular income, with brackets based on total annual earnings. For 2025–2028, a temporary deduction lets workers write off up to $12,500 ($25,000 joint) of qualifying overtime.

By Brad Nakase, Attorney

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Table of Contents

1. Introduction

2. Important lessons learned

3. Overtime Pay: What is it?

4. Does overtime compensation have a distinct tax treatment?

5. Are overtime taxes higher?

6. Has the taxation of overtime pay changed as a result of the One Big Beautiful Bill (2025 Tax Act)?

7. Are overtime and bonuses subject to various taxes?

8. How the overtime tax is calculated

9. 2025 Federal Tax Brackets

10. Bottom Line

Introduction

Are you curious about the tax implications of overtime pay? The fundamentals of overtime tax rate in California will be covered in this guide, along with common misconceptions regarding higher overtime tax rates and an overview of how overtime taxes are calculated.

Important lessons learned

As mandated by state and federal legislation, overtime pay is remuneration for workers who put in longer hours than the average in a day or week, usually at a higher rate.
There is no unique payroll or national overtime tax rate applied to overtime compensation; it is taxed at the same rate as normal salary.
For 2025–2028, there is an additional transitory deduction for overtime: Without changing the way overtime is taxed, individuals may deduct a maximum of $12,500 (or $25,000 for combined filers) in qualifying overtime compensation.
Your filing status and total yearly income, which includes both regular & overtime pay, determine your tax bracket.
Overtime compensation is not subject to a separate tax. Only the amount above the limit will be subject to extra taxation if overtime causes your income to move into a greater tax band.

You must understand the overtime tax rate in California. It will help you plan your finances.

Overtime Pay: What is it?

Employees who put in more than the typical number of hours in a day or week are paid overtime by their employers at an increased rate. Both federal law and a number of state laws enforce this.

The Fair Labor Standards Act, or FLSA, is the big federal rule that deals with overtime. What it basically says is this: if someone works more than 40 hours in a single week, the boss has to pay extra. Not just the normal wage, but time-and-a-half. That’s 1.5 times the regular pay. To put numbers on it, a worker who normally makes $15 an hour would earn $22.50 for each overtime hour.

Now, that’s just the federal baseline. States often add their own spin. Alaska is one example. Overtime in Alaska kicks in after 40 hours a week or after 8 hours in a single day. California goes even further than Alaska. Yes, it has the same 40-hours-per-week and 8-hours-per-day rule, but it adds two extra protections for workers.

If an employee works longer than 12 hours in one day, the pay doubles. And if they end up working more than 8 hours on their seventh straight day of work, that’s also double time. In practice, this means someone pulling long shifts in California can earn far more than they would under federal law alone.

If you are an employer, spend some time learning about the state overtime regulations in your area (and, if your workers work remotely, in their area as well). Learn about your state’s overtime compensation rights if you work as an employee.

Does overtime compensation have a distinct tax treatment?

No, your normal pay and overtime pay are taxed in the same way. Even while overtime increases your pay rate, it does not imply that you will pay more in taxes. Depending on your tax bracket, you will pay the identical tax rate whether you are paid at your regular rate or overtime. In reality, the overtime tax rate in California is identical to your normal income tax rate.

Are overtime taxes higher?

Although it’s a popular misperception, overtime compensation is not taxed higher than regular wages. This misconception happens frequently because workers who put in more hours receive larger paychecks and may observe that more taxes are being deducted. Nevertheless, this does not imply that overtime is subject to a higher tax rate.

In actuality, your overtime compensation is subject to the same taxes as your normal salary. Because the total earnings for the period of pay have grown, more tax may be withheld, which could give the impression that you are paying more in taxes. In actuality, your tax bracket is determined by your annual income rather than the kind of income you receive (regular or overtime).

Only the percentage of your earnings that goes above the threshold will be subject to the higher tax rate if overtime pay puts you in a higher rate of taxation. The reduced tax rates are still applied to the remainder.

Although overtime may seem to be taxed more, this is simply a feature of the system of progressive taxes in the United States, which gradually raises tax rates as income increases. This progressive approach ensures that the overtime tax rate in California is fair and predictable.

Has the taxation of overtime pay changed as a result of the One Big Beautiful Bill (2025 Tax Act)?

For those who receive eligible overtime compensation, the 2025 Tax Act establishes a temporary deduction that will be in effect from 2025 to 2028. Up to $12,500 (or $25,000 for combined filers) in eligible overtime payments may be written off by taxpayers. The calculation of overtime tax is unaffected by this deduction, which is distinct from it.

Are overtime and bonuses subject to various taxes?

Indeed, overtime and bonuses are subject to various taxes. Generally, bonuses are subject to a flat 22% tax rate. In contrast, your regular tax rate is applied to overtime compensation.

How the overtime tax is calculated

Depending on your tax bracket, you compute overtime tax in the same manner as you do all of your federal tax obligations. Overtime is not subject to a separate tax. Simply put, overtime compensation is taxed in accordance with your federal tax bracket after being applied to your regular paycheck.

Example: Crossing Brackets

Let us suppose your salary is $42,000. That means that you are in the 12% tax bracket. With overtime pay, your annual income climbs to $45,000. Still 12%.

But let’s say your overtime pushes you to $50,000. Now, part of your income, specifically, the dollars above $48,475, falls into the 22% bracket. The rest stays taxed at 12%. That’s how brackets work: you only pay the higher rate on the “extra” income.

2025 Federal Tax Brackets

1. Single Filers

10%: $0 – $11,925

12%: $11,926 – $48,475

22%: $48,476 – $103,350

24%: $103,351 – $197,300

32%: $197,301 – $250,525

35%: $250,526 – $626,350

37%: $626,351+

2. Joint Filing (Married)

10%: $0 – $23,850

12%: $23,851 – $96,950

22%: $96,951 – $206,700

24%: $206,701 – $394,600

32%: $394,601 – $501,050

35%: $501,051 – $751,600

37%: $751,601+

3. Married Filing Separately

10%: $0 – $11,925

12%: $11,926 – $48,475

22%: $48,476 – $103,350

24%: $103,351 – $197,300

32%: $197,301 – $250,525

35%: $250,526 – $375,800

37%: $375,801+

4. Head of Household

10%: $0 – $17,000

12%: $17,001 – $64,850

22%: $64,851 – $103,350

24%: $103,351 – $197,300

32%: $197,301 – $250,500

35%: $250,501 – $626,350

37%: $626,351+

Bottom Line

It can save a lot of confusion when the tax season is approaching, to know how to pay tax and overtime tax rate in California. No specific overtime tax is imposed. It is just added to your normal income and is taxed at the same rate. What matters most is your total yearly earnings. With the new temporary deduction through 2028, workers should keep track of overtime hours, the overtime tax rate in California, and tax rules to make the most of their pay.

Have a quick question? We answered nearly 2000 FAQs.

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Overtime Tax Rate California: Overtime Pay and Taxes in 2025

Introduction

Important lessons learned

Overtime Pay: What is it?

Does overtime compensation have a distinct tax treatment?

Are overtime taxes higher?

Has the taxation of overtime pay changed as a result of the One Big Beautiful Bill (2025 Tax Act)?

Are overtime and bonuses subject to various taxes?

How the overtime tax is calculated

2025 Federal Tax Brackets

Bottom Line

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