How Much Is Overtime Taxed in Florida?
Learn how your overtime earnings are taxed, addressing federal requirements and Florida's specific state tax environment.
Overtime pay significantly increases earnings for employees working beyond regular hours. Understanding how these additional wages are taxed is important for financial planning. This article clarifies the tax implications of overtime earnings, covering federal and state considerations.
Understanding Overtime Pay
Overtime pay refers to compensation non-exempt employees receive for working beyond a standard workweek. The Fair Labor Standards Act (FLSA) defines this as more than 40 hours in a workweek. For these extra hours, employees are generally paid at least “time-and-a-half” their regular hourly wage, meaning 1.5 times their normal hourly rate. For tax purposes, overtime earnings are combined with regular earnings to form an employee’s total gross income.
Federal Income Tax on Overtime Earnings
Overtime earnings are fully subject to federal income tax, like regular wages. The U.S. uses a progressive tax system, taxing higher income levels at higher marginal rates. Overtime increases total taxable income, potentially pushing earnings into a higher tax bracket.
Overtime is often mistakenly thought to be taxed at a higher rate. While the actual tax rate is the same as regular pay, withholding can appear higher because overtime is considered “supplemental wages” by the IRS. Employers may withhold federal income tax from supplemental wages using a flat 22% rate for amounts up to $1 million, or by combining it with regular wages.
Actual federal income tax liability is determined when an individual files their annual tax return, based on total annual income, deductions, and credits. A new temporary federal deduction allows eligible workers to deduct a portion of qualified overtime pay. This deduction applies from January 1, 2025, through December 31, 2028, and phases out for higher earners.
Social Security and Medicare Taxes on Overtime
Overtime earnings are subject to Federal Insurance Contributions Act (FICA) taxes, funding Social Security and Medicare. These taxes apply to nearly all earned income. For employees, the Social Security tax rate is 6.2% of earnings, and the Medicare tax rate is 1.45%.
An annual wage base limit applies to Social Security tax; for 2025, earnings above $176,100 are not subject to this portion of FICA tax. There is no wage base limit for Medicare tax, so all earned income, including overtime, is subject to the 1.45% Medicare tax. An additional Medicare tax of 0.9% applies to wages exceeding $200,000 for individuals, with no employer match. FICA taxes are withheld from each paycheck, including those with overtime.
Florida’s State Tax Landscape for Overtime
Florida does not levy a state income tax. This means no state income tax is withheld from regular wages or overtime earnings for Florida residents.
While Florida has no state income tax, employees are still subject to federal income tax and FICA taxes on overtime earnings, as these are federal mandates. The lack of a state income tax can result in higher take-home pay for Florida workers compared to those in states with an income tax, even when earning overtime.