Is Overtime Taxed in Texas?
If you're working extra hours in Texas and earning overtime pay, you might be wondering how much of it you get to keep. The short answer is: yes, your overtime is taxed—but not by the state of Texas.
No State Income Tax in Texas
Texas is one of the few states that does not levy a state income tax. That means whether you earn regular wages, bonuses, or overtime pay, the state won't take a cut of your paycheck. This is great news for workers, especially those who regularly rack up overtime hours.
Federal Taxes Still Apply
Even though Texas doesn't tax your income, the federal government does. Your overtime pay is subject to the same federal withholding as your regular wages. This includes:
Federal Income Tax: Based on your total income and tax bracket.
Social Security Tax: 6.2% of your earnings, including overtime.
Medicare Tax: 1.45% of your total earnings, with no cap.
If you earn above a certain threshold ($200,000 for single filers), an additional 0.9% Medicare tax may apply.
How Overtime Is Calculated and Taxed
Under the Fair Labor Standards Act (FLSA), overtime pay must be at least 1.5 times your regular hourly rate for any hours worked beyond 40 in a workweek. When you receive that extra pay, it's treated as taxable income for federal purposes.
For example, if you usually earn $20/hour and work 10 hours of overtime, your overtime rate would be $30/hour. That $300 in overtime is taxed just like your regular pay.
Final Thoughts
While you won’t see any state tax deductions in Texas, your overtime pay isn’t tax-free. Expect federal taxes to take a portion of your extra earnings. To minimize surprises, review your pay stubs and consider using a paycheck calculator to estimate your take-home pay after overtime.
If you're earning significant overtime and want to plan ahead, a tax professional can help you adjust your withholdings and avoid any surprises at tax time.