A lot of workers heard about a federal "no tax on overtime" proposal during the 2024 and 2025 news cycle. Here is the real situation in Texas for 2026: Texas has never taxed overtime because Texas has no state income tax at all. Federal taxes on overtime still apply. This guide explains how overtime pay is calculated for Texas workers, what actually gets withheld, and how much you keep — with numbers you can compare to your own stub.
If you are hourly in Houston, Dallas, or San Antonio and regularly work more than 40 hours, overtime can be a meaningful slice of your income. Understanding the tax side helps you budget and avoids the surprise of a smaller deposit than you expected. For a full paycheck breakdown including overtime hours, use our Texas Paycheck Calculator in hourly mode.
Is Overtime Taxed in Texas?
Texas does not tax overtime — or regular pay, or bonuses — because there is no Texas state income tax. Zero percent on everything that hits your W-2 as wages. That part is simple.
Federal taxes are a different story. The IRS treats overtime as ordinary wages for withholding purposes. Your employer combines regular and overtime hours in the same pay period and applies federal income tax using your W-4 and the current withholding tables. There is no special "overtime tax rate" at the federal level in 2026.
People sometimes feel like overtime is "taxed more" because a big overtime week pushes more dollars into higher federal brackets. Only the additional income is taxed at the higher marginal rate — not your entire paycheck. FICA (Social Security and Medicare) applies to overtime gross just like base pay: 7.65% combined until you hit the Social Security cap. Texas workers skip the state layer entirely, which is why overtime often feels more rewarding here than in California or New York.
How Overtime Pay Is Calculated in Texas
Under the Fair Labor Standards Act, non-exempt employees must receive at least 1.5 times their regular rate for hours worked over 40 in a workweek. Texas follows federal rules — there is no separate Texas overtime statute with different multipliers for most private-sector workers.
Example: you earn $20 per hour. Your overtime rate is $30 per hour (1.5 × $20). In a 50-hour week, you have 40 regular hours at $20 ($800) plus 10 overtime hours at $30 ($300), for $1,100 gross that week. If you are paid biweekly and the other week was straight 40 hours at $800, your biweekly gross is $1,900 before taxes.
On that $1,100 overtime-heavy week, federal withholding might run roughly $120 to $180 depending on your W-4 and what else you earned in the pay period, plus about $84 in FICA (7.65% of $1,100). Texas adds nothing. Net for the week lands somewhere around $840 to $900 — use the calculator with your actual rate and hours to tighten that range.
Real Overtime Paycheck Examples for Texas Workers (2026)
The table assumes five or ten overtime hours every week at 1.5× the regular rate, single filer, standard deduction spread across the year, and no pre-tax deductions. Weekly gross includes regular plus overtime. Federal tax is approximate withholding, not final tax liability.
| Regular Rate | OT Hours/Week | Weekly Gross | Federal Tax Est. | FICA | Take-Home |
|---|---|---|---|---|---|
| $15/hr | 5 hrs OT | $712.50 | ~$39 | ~$54 | ~$619 |
| $20/hr | 5 hrs OT | $950 | ~$65 | ~$73 | ~$812 |
| $25/hr | 5 hrs OT | $1,187.50 | ~$96 | ~$91 | ~$1,001 |
| $30/hr | 10 hrs OT | $1,650 | ~$164 | ~$126 | ~$1,360 |
| $40/hr | 10 hrs OT | $2,200 | ~$261 | ~$168 | ~$1,771 |
At $25 an hour with five overtime hours weekly, you are adding roughly $187 in gross but keeping about $155 after federal tax and FICA. That is a strong return compared to states that would also take 5% to 9% in state tax on the same overtime dollars.
The "No Tax on Overtime" Federal Proposal — Where It Stands in 2026
Federal lawmakers and candidates talked extensively in 2024 about exempting overtime pay from federal income tax. The idea generated huge search interest — and a lot of confusion about what actually changed for workers.
As of 2026, no broad federal exemption for overtime wages has been enacted into law. Overtime is still subject to federal income tax withholding under standard rules. If Congress passes a change, withholding tables and employer payroll systems would need to update — and we would update the Texas Paycheck Calculator accordingly. For authoritative current rules, see the IRS Newsroom and U.S. Department of Labor overtime guidance.
Texas workers already skip state tax on overtime. A future federal exemption would stack on top of that advantage — but until it is law, plan your budget assuming normal federal withholding on every overtime dollar.
Calculate Your Texas Overtime Take-Home
Overtime weeks vary — seasonal rushes, project deadlines, extra shifts. Plug your actual hourly rate and average weekly hours into the calculator to see per-paycheck and annual net pay, with Texas state tax locked at $0.00.
→ Texas Paycheck Calculator — works for hourly and overtime paySwitch to hourly mode, enter your base rate and total weekly hours (including overtime at 1.5× for hours over 40), and select your pay period. You will get federal tax, FICA, and net take-home without guessing.
For a deeper look at the federal overtime tax debate, see our No Tax on Overtime Calculator — it models potential federal savings if exemption rules ever take effect.