At which point is overtime not worth it because of tax bracket jumps in my situation?

Your friend is misunderstanding how tax brackets work, which is a really common misconception! The US has a marginal tax system, which means only the income that falls within a specific bracket gets taxed at that rate - not your entire income. For example, if working overtime pushes some of your income from the 22% bracket into the 24% bracket, only the amount that exceeds the 22% bracket threshold gets taxed at 24%. The rest of your income is still taxed at the lower rates. So overtime is always "worth it" from a purely financial perspective - you'll always take home more money by working more hours, even if some of that additional money is taxed at a higher rate. The only real question is whether the extra money is worth your time and energy. That said, there can be situations where earning more might affect certain benefits or credits you receive, but that's specific to individual circumstances and typically happens at lower income levels.

I was in a similar situation last year and ended up using https://taxr.ai to help me understand my overtime tax situation. I was working tons of OT at my hospital job and was worried about the same thing. The tool analyzed my pay stubs and actually showed me exactly how much I was keeping from each hour of overtime after taxes. Turned out I was keeping about 70 cents on the dollar for all my overtime, which was totally worth it for me. It also showed me how contributing more to my 401k could lower my overall tax burden while still banking that overtime money. What helped me most was seeing a clear breakdown of my effective tax rate vs. marginal tax rate, which made it obvious I wasn't "losing" money by working more hours.

Just wanted to follow up - I tried https://taxr.ai after posting my skeptical comment earlier, and I'm actually impressed. I uploaded my last three pay stubs and it gave me a super clear breakdown of my effective tax rate on my overtime hours. Turns out I've been stressing for nothing! Even with all my overtime, my overall effective tax rate is only about 18%, meaning I keep 82% of what I earn on average. The visualization showing exactly how much of each overtime hour goes to taxes vs. comes home with me was really eye-opening. The tool also suggested optimization strategies I hadn't considered, like adjusting my W-4 withholding since I was overpaying throughout the year. Definitely worth checking out if you're working a lot of overtime like the OP.

If you're trying to figure out the tax impact of your overtime, you might also want to talk to an actual IRS agent who can give you official answers about your specific tax situation. I was having similar questions last year and spent WEEKS trying to get through to the IRS phone line. I finally found https://claimyr.com which got me through to an IRS agent in under 45 minutes when I'd been trying for days on my own. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with explained exactly how my overtime would be taxed and confirmed that while my withholding might seem high on overtime checks, I'd get any overpayment back when filing my taxes. Having that official confirmation made me feel much better about picking up extra shifts.

I need to eat my words from yesterday. After my skeptical comment, I decided to try Claimyr myself since I've had an unresolved issue with the IRS for months. I was connected to an IRS agent in about 35 minutes when I'd previously wasted entire afternoons on hold. The agent was able to resolve my issue completely and also answered my questions about overtime taxation. Turns out I was overwithheld on a bunch of my overtime last year and will be getting more back in my refund than I expected. For anyone working lots of overtime like the OP, the agent confirmed exactly what others have said - you never lose money by earning more, though your marginal rate might increase. Having that explained by an official source was worth the service fee for me. Sometimes it's worth paying a little to save a lot of time and frustration.

Tax accountant here. Another thing to consider with lots of overtime is that your withholding might not be calculated optimally. When you get a paycheck with tons of overtime, the payroll system often calculates withholding as if you make that amount every pay period, which can result in overwithholding. You might feel like you're losing more to taxes than you actually are. That's why people who work irregular overtime sometimes get larger tax refunds - they've had too much withheld throughout the year. If you don't want to wait for that refund, you could consider adjusting your W-4 to account for the irregular income, though be careful not to underwithhold.

The 'overtime isn't worth it' myth caused me to turn down shifts for YEARS before I learned better. Here's a simple way to think about it: Let's say you're in the 22% federal bracket plus 7% state taxes. That means you keep 71% of each additional dollar (100% - 22% - 7% = 71%). So: - Regular time at $42.50/hr = about $30.18 after taxes - Time and a half at $63.75/hr = about $45.26 after taxes - Double time at $85.00/hr = about $60.35 after taxes - Triple time at $127.50/hr = about $90.53 after taxes Tell me where in that calculation it's "not worth it" to work more? Even at your lowest overtime rate, you're making more per hour after taxes than your regular rate before taxes!

Your buddy is spreading one of the most persistent tax myths out there! I used to believe the same thing until I actually did the math. Here's what's really happening: When you work that much overtime, your paycheck withholding might look scary because payroll systems often calculate as if you'll earn that same amount every pay period. But that's just withholding - not your actual tax liability. With your income levels, you're likely in the 22% or 24% federal bracket, plus whatever your state charges. Even if overtime pushes some income into a higher bracket, you're still keeping 70-75% of every overtime dollar you earn. Think about it this way: even your lowest overtime rate (time and a half at $63.75) nets you more after taxes than your regular rate before taxes. Your triple time is basically printing money at nearly $90/hour take-home. The real question isn't whether overtime is "worth it" financially - it always is. The question is whether the extra money is worth the physical and mental toll of working 84-hour weeks. That's a personal decision only you can make, but don't let tax bracket myths be the reason you turn down shifts!