Bonus Tax

How Bonus Withholding Works

A bonus is a “supplemental wage” under IRS rules, and most employers withhold federal tax on it at a flat 22% rather than your regular paycheck’s graduated tax brackets — rising to a mandatory 37% on any part of your bonuses for the year above $1,000,000. Enter your bonus amount, and this calculator applies that flat withholding rate alongside standard FICA payroll taxes (Social Security and Medicare) to estimate your net bonus after withholding.

This is distinct from the Paycheck / Salary Calculator calculator, which estimates take-home pay from regular salary using the progressive federal income tax brackets — a bonus is withheld under a completely different set of rules. If you’re adjusting your withholding for the rest of the year around an upcoming bonus, the W-4 / Paycheck Withholding Calculator can help you plan that.

Key Factors to Consider

• Not every employer uses the flat percentage method this calculator assumes. The IRS also permits an “aggregate method,” where a bonus paid together with a regular paycheck is combined with that regular pay and withheld as one lump sum using standard withholding tables, rather than the flat 22%/37% supplemental-wage rate. The aggregate method can withhold noticeably more or less than the flat rate depending on your regular income level — if your bonus withholding doesn’t match this calculator, your employer may be using the aggregate method instead.
• This is withholding, not your final tax bill. Whichever method your employer uses, it’s just an upfront estimate collected on your behalf — your actual tax owed on the bonus is determined by your total income for the year when you file, and any difference between what was withheld and what you actually owe is refunded or paid then.
• State and local withholding are separate from this calculator’s federal-only estimate. Many states apply their own supplemental-wage withholding rules on top of the federal amount shown here, which would further reduce your actual net bonus.
• The $1,000,000 threshold tracks your cumulative supplemental wages for the whole calendar year, not just this one bonus. If you’ve already received other bonuses, commissions, or similar supplemental pay earlier in the year, those amounts count toward the threshold — a $200,000 bonus is withheld entirely at 22% on its own, but the same bonus paid after you’ve already received $900,000 in supplemental wages this year would have $100,000 of it withheld at the mandatory 37% rate instead.

Interpreting Your Results

The 22% (or 37%) withheld here is a flat rate applied only to the bonus itself — it isn’t necessarily the tax rate you’ll actually end up paying on that money once your whole year’s income is added up. Which direction it goes depends on your marginal tax bracket:

• If your marginal tax rate is below 22%, the flat withholding likely took more than the bonus actually owes, and you’ll see the difference come back as part of your refund (or a smaller balance due) when you file.
• If your marginal tax rate is above 22% — common for higher earners, or for anyone whose bonus itself pushes their income into a higher bracket — the flat withholding probably wasn’t enough, and you may owe additional tax on the bonus when you file, even though it was withheld correctly under the IRS’s own rules.

Either way, the net bonus this calculator shows is what actually lands in your bank account today — treat the true cost or benefit of the bonus at tax time as a separate, later reconciliation, not something this one paycheck already settles.

Common Mistakes

• Assuming the net bonus shown here is the final word on what you owe. It’s an accurate estimate of what your employer withholds today, not a preview of your total tax liability for the year — see Interpreting Your Results above.
• Forgetting FICA taxes reduce a bonus too. It’s easy to focus only on the 22%/37% federal income tax withholding and forget that Social Security and Medicare are also taken out of a bonus, the same as any other wages.
• Not accounting for other supplemental wages already paid this year when estimating whether the 37% rate applies — the threshold is cumulative across the calendar year, not per bonus (see Key Factors above).
• Assuming your employer must use the flat percentage method. The IRS permits either method, and the choice is the employer’s, not yours — if your paycheck shows different withholding than this calculator estimates, that’s the most likely reason, not an error.

The Formula

$$\vB{\text{Federal Withholding}} = \vA{\text{Bonus}} \times 22\%\ \text{(37\% on any amount over \$1M in cumulative bonuses this year)}$$ $$\vC{\text{FICA Tax}} = \text{Social Security (6.2\%, up to the wage base)} + \text{Medicare (1.45\%, plus 0.9\% above \$200k)}$$ $$\text{Net Bonus} = \vA{\text{Bonus}} - \vB{\text{Federal Withholding}} - \vC{\text{FICA Tax}}$$

Worked Example

A $10,000 bonus, with $0 in prior bonuses and $50,000 in regular wages already paid this year:

1. Federal Withholding: $\vA{10{,}000} \times 22\% = \vB{2{,}200}$.
2. Social Security: $10{,}000 \times 6.2\% = 620$ (well under the annual wage base).
3. Medicare: $10{,}000 \times 1.45\% = 145$.
4. Total withholding: $2{,}200 + 620 + 145 = 2{,}965$, leaving a net bonus of $7,035.

Useful to Know

If your bonus withholding turns out to be too low relative to your total tax liability for the year, you could face an IRS underpayment penalty, not just a bigger bill at tax time. The IRS generally expects you to pay at least 90% of what you owe for the year (or 100–110% of last year’s tax, whichever is smaller) through withholding or estimated payments as the year goes along — if a large bonus pushes your effective tax rate well above the flat 22% withheld on it, and your regular paycheck withholding doesn’t make up the difference, you can end up owing an underpayment penalty on top of the extra tax itself. If you’re expecting a large bonus and your income puts you well above the 22% bracket, consider adjusting your Form W-4 for the rest of the year (the

W-4 / Paycheck Withholding Calculator can help) or making an estimated tax payment to cover the gap, rather than waiting to find out at filing time.