How Bonuses Are Taxed (2026)
A bonus feels like free money until the paycheck arrives and a third of it has disappeared. The bonus did not get a special tax. It just got withheld differently from regular pay, and the withholding can look dramatically larger than your real tax rate. Understanding the rules turns a disappointing paycheck into a predictable one, and in some cases helps you keep more.
What counts as a bonus (supplemental wages)
The IRS lumps bonuses with other irregular payments under the label supplemental wages. These include bonuses, commissions, overtime pay in some situations, severance pay, awards, prizes, back pay, and certain taxable fringe benefits. Anything paid on top of your regular salary or hourly wage can be treated this way. The distinction matters because the IRS has special withholding rules for supplemental pay that differ from regular wages.
Two ways employers withhold on bonuses
1. The percentage (flat-rate) method
If the bonus is paid separately from regular wages, or the payment is identified as a bonus, the employer may simply withhold a flat 22% of the bonus for federal income tax. There are no brackets, filing status or W-4 information involved. This is the easiest and most common approach. For supplemental wages above $1 million in a calendar year, a flat 37% rate is mandatory on the excess.
2. The aggregate method
If the bonus is paid together with regular wages, the employer may add the bonus to the regular wages for that pay period, calculate withholding on the total as though it were one regular paycheck, and subtract the withholding already calculated on the regular wages. Because a large one-time amount in a single paycheck looks like a very high annual income when annualized, the aggregate method can withhold at a higher rate than 22%.
Worked example: a $10,000 bonus on an $80,000 salary
A single filer in California, paid biweekly, receives a $10,000 bonus:
| Item | Flat method | Aggregate method |
|---|---|---|
| Federal income tax withheld | $2,200.00 | $2,821.70 |
| Social Security (6.2%) | $620.00 | $620.00 |
| Medicare (1.45%) | $145.00 | $145.00 |
| Estimated state income tax | $930.00 | $930.00 |
| Net bonus | $6,105.00 | $5,483.30 |
Under the flat method, about 39% of the bonus goes to taxes. Under the aggregate method, it is closer to 45%. That is an extra $621.70 withheld, which comes back on your tax return if your true bracket is 22%.
What is your actual tax on the bonus?
When you file your return, the bonus is simply added to your other income and taxed at your marginal federal rate. For a single filer whose taxable income is already past $105,700 the bonus is taxed at 24% or more federally; below that, at 22% or 12%. A worker in the 12% bracket whose employer withholds 22% will get the difference back as a refund. A worker in the 24% bracket will owe a little more at filing. Add FICA (7.65% until the Social Security wage base of $184,500 is reached, then 1.45%) and your state’s rate to estimate the real total.
Social Security and Medicare apply too
There is no exemption from FICA for bonuses. Once your total wages for the year exceed the Social Security wage base, the 6.2% stops, so a bonus paid late in the year to a high earner has a smaller FICA bill. Wages above $200,000 face an extra 0.9% Additional Medicare Tax, which employers withhold automatically.
State taxes on bonuses
Many states withhold bonuses at a flat supplemental rate. California, for instance, withholds 10.23% on bonuses and stock options. Others follow the same rules as federal withholding. The state’s real tax is calculated on your annual return, so state withholding can also be higher or lower than the true amount.
Why bonuses feel heavily taxed
The explanation is arithmetic, not a special tax. A bonus is stacked on top of your regular salary, so it lands at your highest marginal rate: for most mid-income workers, 22% federal, 7.65% FICA and 4-9% state, for a total of 33-39%. The portion of your salary below the top bracket is taxed at lower rates, so your average rate on salary is lower than your marginal rate on the bonus. That gap is why a bonus check of $5,000 might arrive at $3,200 or less.
Ways to keep more of your bonus
- Redirect part of it to a 401(k). Ask HR whether you can contribute a percentage of the bonus. Every dollar deferred skips federal and most state income tax (but not FICA). In the 22% bracket, a $2,000 deferral reduces federal tax by $440. The 2026 limit is $24,500.
- Fund an HSA through payroll if you have a high-deductible health plan, which avoids income tax and FICA. Limits are $4,400 self-only and $8,750 family for 2026.
- Time the payment. If you control when a bonus is paid, shifting it from December to January moves it to the next tax year. That can help when you are close to a bracket boundary or when your income will be lower next year.
- Update your W-4. If your total tax will be higher than your withholding because of bonuses, adjust Step 4(c) on your W-4 for the rest of the year, or reduce it if you will overpay. See the W-4 guide.
- Know your marginal rate. If you are in the 10% or 12% bracket, the flat 22% is a loan to the government; plan to see a refund.
A quick way to estimate a bonus check
For a ballpark number, multiply the gross bonus by the sum of your marginal federal rate, 7.65% for FICA and your state rate. A worker in the 22% federal bracket in a state with a 5% income tax is looking at roughly 34.65% in total, so a $5,000 bonus nets about $3,270. If your employer uses the flat method, the federal share on the check will be exactly 22%, and the rest follows from FICA and the state tables. If you want precise numbers for your own situation, run them in the bonus tax calculator and compare the flat and aggregate results.
Bonuses versus regular raises
People sometimes ask whether they should negotiate a bonus or a higher salary. Taxes do not favor one over the other: both are wages taxed at your marginal rate, and both are subject to FICA. The difference is in timing and certainty. A raise recurs every year and raises the base for retirement matching and future raises. A bonus is paid once and is often discretionary, which means the withholding quirks described above show up in a single check rather than being smoothed across the year.
Special cases: severance, commissions and equity
Commissions paid regularly with salary are often treated as regular wages. Severance is almost always supplemental, and the flat method often applies. For equity compensation, the vesting date is when income is recognized, and employers typically withhold shares to cover the tax. Because the flat 22% rate may be too low for someone in the 32% or 35% bracket, large equity vests are a frequent cause of April balances due; if you receive large awards, plan estimated payments or raise your W-4 withholding.
Common questions about bonus taxes
Can an employer withhold less than 22%?
Under the flat method, no: the rate is set by the IRS. Under the aggregate method, withholding follows your W-4 and the regular withholding tables, so a different W-4 changes the result.
What if my bonus is paid in stock?
Restricted stock units and similar awards are supplemental wages when they vest, and the employer withholds in the same way, often by selling or withholding shares. The value is taxed as ordinary income.
Do I get the bonus tax back?
Possibly. Your refund or balance depends on your total withholding for the year compared with your actual tax. A bonus withheld at 22% will produce a refund when your marginal rate is lower and a small balance due when it is higher. Our bonus tax calculator estimates the net bonus under both methods, and the paycheck calculator shows your regular take-home pay for comparison.