Does Illinois Tax Overtime Pay? (2026)
Yes — at the state level, Illinois taxes overtime exactly like regular wages. But the new federal overtime deduction (2025–2028) changes the overall math significantly. Here's the full picture.
The three layers of tax on Illinois overtime
- Federal income tax: overtime is taxable — but for 2026, the premium ("half") portion of FLSA time-and-a-half is deductible up to $12,500 (single) / $25,000 (joint). Estimate yours with the overtime deduction calculator.
- Payroll taxes: Social Security (6.2%) and Medicare (1.45%) always apply to overtime — no exceptions.
- Illinois state tax: overtime is added to your regular wages and taxed under the normal flat 4.95% rate. Illinois has not adopted the federal overtime deduction (illinois uses a per-person exemption allowance ($2,925 in 2026) instead of a standard deduction).
What $5,000 of overtime actually costs in tax
Say you earn $5,000 of overtime (time-and-a-half) in Illinois as a typical single filer:
- Payroll taxes take 7.65% ≈ $383.
- Illinois state tax ≈ $248 (at 4.95%).
- Federal income tax applies to the full $5,000 through withholding — but at filing, the ~$1,667 premium portion is deductible, worth roughly $200–$400 back depending on your bracket.
Bottom line: working overtime in Illinois is more rewarding in 2026 than the raw withholding suggests — most workers see the federal benefit as a larger refund.
See your full paycheck picture
The Illinois paycheck calculator shows your complete 2026 take-home pay — federal, FICA, and Illinois state tax — per paycheck, month, or year.
Frequently asked questions
Did Illinois adopt the federal "no tax on overtime" rule?
No. The overtime deduction is federal-only, and Illinois continues to tax overtime as ordinary wages. A few states have debated their own exemptions — check the state DOR for current-year changes.
Is overtime withheld at a higher rate?
It can look that way on a single paycheck — a big OT check pushes that period's withholding into a higher bracket temporarily. At filing, everything settles to your actual annual rate, so the 'overtime is taxed more' feeling is a withholding illusion, not a real higher tax.
Does the federal overtime deduction lower my state taxable income?
Generally no — most states, including Illinois, calculate state tax without the new federal deduction. It reduces federal taxable income only.