How bonuses are taxed
The IRS treats bonuses as supplemental wages. When they're paid separately from regular pay, employers can withhold a flat 22% for federal income tax. The part of supplemental wages over $1 million in a year must be withheld at 37%.
Social Security tax of 6.2% applies until your wages for the year reach $184,500, and Medicare tax of 1.45% applies to all of it. Employers withhold an extra 0.9% Medicare tax on wages over $200,000 in the year.
Is a bonus taxed more than a paycheck?
No. Withholding is just a prepayment. When you file your return, your bonus is added to your other income and taxed at your normal rates. If 22% was more than your actual rate, the difference comes back in your refund; if it was less, you may owe.
State tax on bonuses
Many states set their own flat rate for withholding on bonuses, and states without an income tax withhold none. Your pay stub or your state's withholding guide shows the rate.
Frequently asked questions
How do I keep more of my bonus?
Putting part of it in a traditional 401(k), if your plan allows contributions from bonuses, lowers the federal and usually state tax withheld. Social Security and Medicare still apply.
What does grossing up a bonus mean?
Paying a larger bonus so the employee receives a set amount after taxes. Choose “Find the bonus for a take-home amount” to calculate it.