The Employee’s Guide to FLSA Overtime — and Your Taxes
Understand the “regular rate,” see how bonuses change OT, and learn how this affects what hits your paycheck and tax return.
TL;DR
- FLSA overtime uses your regular rate (wages + nondiscretionary bonuses + differentials) ÷ total hours.
- Traditional OT calculations (base rate only) can underpay OT when bonuses/differentials exist.
- Overtime remains taxable wages. Any rebate/credit is applied at tax time, not on payday.
- This guide is educational, not legal or tax advice. Always check current IRS/DoL guidance.
1) What the FLSA really says about overtime
The Fair Labor Standards Act requires overtime at least 1.5× your regular rate of pay for hours over 40 in a workweek. The regular rate includes hourly wages, shift differentials, training pay, on-call pay, and nondiscretionary bonuses.
Plain English: if a bonus or diff increased your total earnings this week, your overtime rate should reflect that.
2) FLSA vs. Traditional overtime
| Aspect | Traditional OT | FLSA OT |
|---|---|---|
| Basis | Base hourly rate only | Total earnings ÷ total hours (regular rate) |
| Includes nondisc. bonus? | No | Yes |
| Common result | Lower OT pay | Higher OT pay |
| Compliance | Risky | FLSA-compliant |
Try it yourself: add a $100 attendance bonus in the calculator — see how your regular rate and OT premium rise.
3) About overtime tax rebates/credits (if applicable)
Some proposals/credits may allow a tax-time rebate/credit linked to properly calculated overtime. If a program applies, it generally operates as a credit on your tax return (after withholding), not a change to payroll tax withholding.
4) How overtime is taxed
- Overtime is ordinary wage income — subject to income tax and FICA, like regular pay.
- Credits/rebates (where available) are typically applied on your tax return, not your paycheck.
- Your W-2 reflects total wages; any credit reduces tax due or increases your refund during filing.
5) Looking ahead to next year
Tax and labor rules can change annually. If a temporary credit exists this year but sunsets next year, accurate FLSA paystubs now may increase eligibility or documentation for any year-specific benefits.
We’ll keep this page updated as rules evolve.
Next steps
- Run the Weekly Calculator and save your results.
- Share your numbers with your employer if you suspect underpayment (use our CSV export).
- Get the 2025 Payroll & Tax Guide for a deeper dive on filing.
Educational only — not legal/tax advice. Check current IRS/DoL guidance for your situation.