The Illinois overtime tax rate is 4.95%, the same flat rate the state applies to every other dollar of income.1Illinois General Assembly. Illinois Compiled Statutes 35 ILCS 5/201 – Tax Imposed Working extra hours never pushes you into a higher state bracket, because there are no state brackets. The twist for 2026 is on the federal side: a new deduction lets many hourly workers shield part of their overtime from federal income tax, but Illinois has chosen not to follow it. So your state tax on overtime stays the same whether you qualify for the federal break or not.
Illinois Taxes Every Overtime Dollar at 4.95%
Illinois has no progressive income tax. Base salary, overtime, bonuses, and other earned income are all taxed at the same 4.95% rate, and your employer withholds that percentage from each overtime check just as it does from a regular one.
Illinois builds its state income tax calculation on top of your federal adjusted gross income, then applies its own additions and subtractions.2Illinois General Assembly. Illinois Compiled Statutes 35 ILCS 5/203 – Base Income Defined One of those additions is the new federal overtime deduction: Illinois adds it back, so every overtime dollar remains subject to the full 4.95% at the state level regardless of what you claim on your federal return.
The Federal Overtime Deduction (and Why Illinois Workers Still Benefit)
For tax years 2025 through 2028, the One, Big, Beautiful Bill Act created a federal deduction for what the IRS calls “qualified overtime compensation.” The deductible amount is the premium portion of your overtime, meaning the “half” in time-and-a-half above your regular hourly rate.3Internal Revenue Service. One, Big, Beautiful Bill Act – Tax Deductions for Working Americans and Seniors
The deduction caps at $12,500 for single filers and $25,000 for joint filers, and it phases out once modified adjusted gross income passes $150,000 ($300,000 for joint filers).4Internal Revenue Service. Questions and Answers About the New Deduction for Qualified Overtime Compensation
Who Qualifies
You need to be both covered by the Fair Labor Standards Act and non-exempt from its overtime rules. That typically means hourly workers and salaried employees whose pay falls below the FLSA salary threshold. Salaried exempt employees don’t qualify, even if their employer voluntarily pays overtime. Workers whose overtime comes only through a union contract or state law rather than the FLSA are also out.
If your employer pays above the FLSA minimum, say double-time instead of time-and-a-half, only the FLSA-required premium qualifies. Anything beyond that counts as ordinary taxable income for deduction purposes.
What It Looks Like on Your Paychecks
The federal deduction is claimed on your return, not applied through withholding, so your paychecks during the year won’t change because of it. The savings show up when you file. And because Illinois adds the deduction back, the benefit lands only on your federal bill. Your Illinois liability is unchanged.
FICA Comes Out Too
Separate from income tax, every overtime dollar is hit by FICA payroll taxes:
- Social Security: 6.2% on earnings up to $184,500 in 2026.
- Medicare: 1.45% on all earnings, with no cap.
That’s 7.65% off the top of your overtime check for payroll tax alone.5Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates The federal overtime deduction does not reduce FICA. Even on qualifying overtime, you pay the full payroll tax.6Social Security Administration. Contribution and Benefit Base
There’s also an additional 0.9% Medicare surtax on wages above $200,000 in a calendar year ($250,000 for joint filers). Employers withhold it automatically once your year-to-date pay crosses $200,000, and the final filing-status threshold gets reconciled on your return.7Internal Revenue Service. Questions and Answers for the Additional Medicare Tax Heavy overtime is the kind of thing that can push a worker past that line.
Federal Income Tax and the “Bumped Into a Higher Bracket” Worry
Federal income tax uses progressive brackets, so overtime earnings pile on top of your base wages and the last dollars may fall into a higher bracket. Only the dollars above a threshold get the higher rate. Everything below it keeps its lower rate. Your effective rate ticks up a little, but your whole paycheck doesn’t suddenly jump to a new tax rate.
Why the Overtime Check Still Looks Small
The “overtime is taxed more” complaint usually comes from how withholding is calculated, not from how much tax you actually owe. There are two common methods, and both can take more than they need to.
The Flat 22% Method
When an employer treats overtime as supplemental wages and runs it separately, it can withhold a flat 22% for federal income tax.8Internal Revenue Service. Publication 15 (2026), (Circular E), Employer’s Tax Guide If your actual marginal rate is 12%, that withholding nearly doubles what you’ll owe on those dollars. You get the extra back as a refund, but not until you file.
The Aggregate Method
The other method lumps regular pay and overtime together for the period, then calculates withholding as if you earned that amount every pay period all year. One big overtime week can make the system project an annual income far above what you’ll actually earn and withhold accordingly.
Neither method changes what you owe at year-end. They change the timing. If overtime is sporadic, the aggregate method almost guarantees over-withholding.
Adjusting Your Withholding
If overtime is a regular part of your pay and you’d rather the paychecks reflect your real liability, submit an updated Form W-4. Step 4(c) lets you request a specific extra dollar amount of federal withholding per pay period, which is useful if you expect to owe more at filing time.9Internal Revenue Service. Employee’s Withholding Certificate The IRS Tax Withholding Estimator at irs.gov/W4App walks through the math using your actual income and deductions.
If the flat 22% method is over-withholding and you want more cash in each check, you can adjust your W-4 instead. Watch the underpayment line: the IRS generally won’t charge a penalty if you owe less than $1,000 at filing, or if you’ve paid in at least 90% of your current-year tax, or 100% of last year’s (110% if your AGI exceeded $150,000).10Office of the Law Revision Counsel. 26 USC 6654 – Failure by Individual to Pay Estimated Income Tax
A Worked Example
Say you’re a single Illinois worker earning $55,000 in base pay and $8,000 in overtime, of which $4,000 is the premium “half” above your regular rate. For 2026, the tax on that overtime looks roughly like this:
- Illinois state tax: 4.95% on the full $8,000 = $396. No state deduction, because Illinois opted out.
- Federal income tax: your $63,000 puts you in the 22% bracket. The $4,000 qualifying premium can be deductible under the federal overtime deduction, which at a 22% marginal rate saves roughly $880 on your federal return.
- FICA: 7.65% on the full $8,000 = $612. The overtime deduction doesn’t touch this.
Your paycheck withholding during the year may look worse than those numbers suggest, especially under the aggregate method, but filing-time math is what actually settles up. Between Illinois’s flat 4.95% and the federal premium deduction, overtime remains worth working. The system takes its cut from the extra hours; it never takes more than you earn.