Is Overtime Taxed More?
Overtime is taxed like regular pay. Why the withholding on an overtime cheque looks high, what you really keep, and what overtime does change.
The short version
- No. Overtime is taxed exactly like regular pay, at your marginal rate. There's no overtime tax in Canada.
- It looks worse because payroll withholds tax as if every pay were that big. A fat overtime cheque is taxed as if you earned that all year.
- Example, Ontario, $55,000 salary paid every two weeks: $600 of overtime in one pay has about $159 extra tax withheld (about 26%). The real tax on it at year-end is about 23%.
- Any over-withholding comes back as a refund. Any under-withholding (rare with overtime) shows up as a balance owing.
- Overtime can push the last dollars into a higher bracket, and it raises family income for the next benefit year. That's the real cost, not a special tax.
Is Overtime Taxed More in Canada?
Few beliefs are as durable as "don't take the overtime, it all goes to tax." It's repeated on every job site in the country and it's wrong. Every dollar of overtime is taxed at the same rate as the last dollar of your regular pay. What changes is the withholding, the deposit your employer sends to CRA, and that's settled when you file. So take the Saturday shift. Just know what the stub will look like.
Overtime: Withheld vs Actually Owed
| Ontario, $55,000 salary | Amount |
|---|---|
| Normal biweekly pay | $2,115, about $276 income tax withheld |
| Same pay plus $600 overtime | $2,715, about $435 income tax withheld |
| Extra withheld on the $600 | about $159 (26.5%) |
| Real income tax on $600 more for the year | about $139 (23%), plus CPP and EI |
From our 2026 rules engine, rounded; real payroll uses CRA's formulas, which are close. Over a whole year, $5,000 of overtime at this salary costs about $1,140 in income tax, plus about $300 of CPP and $80 of EI. You keep about $3,480. See your own numbers in the salary tax calculator.
Will the overtime push you into a higher bracket?
Tell the assistant your salary, expected overtime and province. It shows the tax on the overtime, whether any of it falls in a higher bracket, and what happens to your benefits.
What Overtime Really Changes
- Your marginal rate on the extra dollars. Only the part of income above a bracket line is taxed at the higher rate; see tax brackets and marginal tax rate.
- CPP and EI. Deducted on overtime until you reach the yearly maximums; see CPP and EI deductions.
- Next year's benefits. More income in 2026 can mean a smaller child benefit and Groceries and Essentials Benefit from July 2027.
- Overtime meals. A reasonable meal allowance for working two or more hours of overtime, occasionally, is generally not taxable; see taxable employee benefits.
Keeping More of Overtime Pay
- RRSP contributions deduct at the same marginal rate the overtime is taxed at; see the RRSP tax savings calculator.
- Two jobs plus overtime can mean too little withheld overall; see why do I owe tax?
- Bonuses work the same way; see bonus tax. The whole pay stub is explained on paycheque deductions.
Overtime Tax Questions
Is overtime taxed more than regular pay in Canada?
No. Overtime is employment income taxed at your marginal rate, the same as the last dollars of your regular pay. Withholding on a large pay can be higher, but the difference is settled on your return.
Why is so much tax taken off my overtime cheque?
Payroll calculates tax as if each pay were repeated all year, so a pay inflated by overtime is withheld at a higher rate than your actual yearly tax rate.
Will I get the extra tax on overtime back?
If more was withheld than your actual tax for the year, the difference is refunded when you file.
Can overtime put me in a higher tax bracket?
Only the dollars above a bracket threshold are taxed at the higher rate. The rest of your income is taxed the same as before.
Is CPP and EI deducted from overtime?
Yes, until you reach the yearly maximum contributions and premiums.
Sources: CRA, T4127 Payroll Deductions Formulas, January 2026. Checked October 2026. Withholding figures are our estimate of CRA's formula and vary slightly with payroll software and your TD1 claims.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.