The Fair Labor Standards Act is the federal overtime law that applies to most employees in the United States. Key rules:
Here is how to calculate a week with regular hours and overtime:
| Component | Calculation | Result |
|---|---|---|
| Regular hours (40) | 40 × $22.50/hr | $900.00 |
| Overtime hours (6) | 6 × ($22.50 × 1.5) | $202.50 |
| Total Gross Pay | — | $1,102.50 |
| OT premium only (for deduction) | 6 × $11.25 (the extra 0.5x) | $67.50 (deductible) |
The overtime premium (the $67.50 in this example) is the portion that qualifies for the new OBBBA federal deduction, up to $12,500/year.
Most states follow federal FLSA overtime rules. A few states have stricter requirements that apply in addition to federal law:
| State | Daily OT Rule | Weekly OT Rule | Double Time? |
|---|---|---|---|
| California | After 8 hrs/day; after 12 hrs = double time | After 40 hrs/week | Yes — after 12 hrs/day or 7th consecutive day |
| Nevada | After 8 hrs/day (if earning under 1.5x min wage) | After 40 hrs/week | No |
| Alaska | After 8 hrs/day | After 40 hrs/week | No |
| All other states | No daily OT rule | After 40 hrs/week (FLSA) | Only if agreed upon |
Important: State overtime requirements that are stricter than FLSA must be followed. Only FLSA-required overtime (not state-mandated daily OT) qualifies for the 2026 OBBBA federal overtime deduction.
The One Big Beautiful Bill Act, signed July 4, 2025, created a temporary federal income tax deduction on qualifying overtime pay. Here are the exact rules, sourced from IRS guidance and the PayrollOrg OBBBA summary:
If you worked overtime, here is a quick check to verify your gross pay is correct:
If your stub shows less than this calculation, you may be owed additional pay. Document the discrepancy and raise it with your payroll department first. Persistent underpayment may be reported to your state labor board or the U.S. Department of Labor.
Federal overtime under the FLSA is required for non-exempt employees who work more than 40 hours in a single workweek. The overtime rate must be at least 1.5 times the regular rate. FLSA does not require daily overtime — only California, Nevada, and Alaska have mandatory daily overtime rules.
No. Overtime is taxed at the same federal and state rates as regular pay. The One Big Beautiful Bill Act created a new deduction of up to $12,500 per year for single filers on qualifying FLSA overtime premium pay, claimed on your annual tax return. Your employer still withholds income tax from overtime paychecks during the year.
California requires overtime after 8 hours worked in a single day and double time after 12 hours. Nevada requires daily overtime after 8 hours for employees earning below 1.5 times the minimum wage. Alaska requires daily overtime after 8 hours. All other states follow the federal FLSA standard of weekly overtime only after 40 hours.
No. The OBBBA overtime deduction applies only to overtime required by the federal FLSA — hours above 40 per week. California's daily overtime rules (after 8 hours per day) are not covered by the OBBBA deduction. Only the FLSA weekly overtime premium qualifies.
Most salaried employees earning more than $684 per week ($35,568 per year) are potentially exempt from FLSA overtime, but job duties also matter. Executive, administrative, and professional employees may be exempt. Job title alone does not determine exempt status — actual duties do. If you are uncertain, consult your HR department or an employment attorney.