Overtime Pay Rules: Federal 40-Hour Week vs California Daily Overtime

Overtime rules decide when an extra hour pays 1.5× or even 2× your hourly rate. Federal law looks at the week; California also looks at each day. Here's how both work, with examples at $20 an hour, and how the new federal overtime deduction fits in.

Federal rule (most states)

Under the Fair Labor Standards Act, non-exempt employees get 1.5× their regular rate for every hour over 40 in a work week. Long days don't matter on their own: four 10-hour days is 40 hours and no overtime. A 50-hour week at $20 pays $800.00 regular + $300.00 overtime = $1,100.00.

California's daily rule

• 1.5× for hours over 8 in a day (up to 12), and for hours over 40 in a week.
• 2× for hours over 12 in a day.
• Also 1.5× for the first 8 hours on the 7th day in a row worked, and 2× after 8 that day (not in our examples).

Same hours, different pay: four 10-hour days earn $80.00 more in California, because the 9th and 10th hour each day count as overtime there.

Who gets overtime

• Most hourly workers do. Being paid a salary doesn't by itself make you exempt.
• "Exempt" employees (certain executive, administrative and professional jobs that also meet a minimum salary) don't. Your job duties matter, not your title.
• Some states have their own rules and higher salary limits. Check your state labor department.

The federal tax deduction for overtime

For 2025 through 2028, you can deduct the overtime premium (the extra half in time-and-a-half) from your federal taxable income, up to $12,500 a year ($25,000 married filing jointly). It phases down above $150,000 of income ($300,000 married). In the 50-hour example, the premium part is $100.00 for that week. It still counts for Social Security and Medicare tax, and for state tax in most states.