How Bonuses Are Taxed

For federal tax, employers typically withhold bonuses at a flat 22% supplemental rate rather than your normal paycheck rate. Any supplemental pay above $1 million in a year is withheld at 37% on the portion over the threshold.

That flat rate is why a bonus often looks more heavily taxed than your salary — the withholding is a fixed 22% regardless of your usual bracket.

There is no special bonus tax. Your bonus is ordinary income, taxed at the same marginal rates as the rest of your pay when you file your return.

The 22% is just a prepayment. If it held back more than your bonus actually costs at your marginal rate, the extra comes back as a refund. If you're a high earner whose marginal rate is above 22%, the flat rate can under-withhold and you may owe a little.

Employers can withhold on a bonus two ways. The percentage method applies the flat 22% to the bonus by itself. The aggregate method adds the bonus to a regular paycheck and withholds as if that larger amount were your normal pay — which usually holds back more up front because it looks like a higher-income period.

The method only changes timing. Your actual tax for the year is identical once you file; you either get more back or owe less depending on how much was withheld along the way.

A bonus is wages, so Social Security (6.2% up to the annual wage base) and Medicare (1.45%, plus a 0.9% surtax for high earners) come out just like on regular pay. Stack those on top of the 22% and it's easy to see why a bonus can look like it's taxed around 40% at the moment you receive it.

State treatment varies: many states have their own supplemental withholding rate, and the nine no-income-tax states withhold nothing at the state level. To estimate your own take-home on a bonus, our bonus tax calculator breaks out the withholding versus what you actually owe.