How Much Tax Will You Pay on Your Bonus?
Bonuses are taxed differently than regular wages. Employers usually withhold a flat 22% federal rate on bonuses, but your actual tax rate depends on your total income. This calculator shows your net bonus after all taxes.
How Bonuses Are Taxed
The IRS treats bonuses as supplemental wages. Employers have two options for withholding:
- Flat 22% method: Withhold 22% federal on any bonus under $1 million. Simple but often wrong.
- Aggregate method: Combine bonus with regular pay, calculate withholding as if it were a normal paycheck.
Why the 22% Withholding May Not Match Your Tax Bracket
If your top bracket is 12%, you may get a refund when you file. If you are in the 32% bracket, you may owe at tax time. The 22% is just a withholding estimate.
Worked Example: $10,000 Bonus
- Bonus: $10,000
- Federal withholding (22%): $2,200
- Social Security (6.2%): $620
- Medicare (1.45%): $145
- State tax (assume 5%): $500
- Total withheld: $3,465
- Net bonus: $6,535
Bonus Tax by Bracket
| Your Tax Bracket | Withholding (22%) | Actual Tax | Refund or Owe |
|---|---|---|---|
| 10% | $2,200 | $1,000 | +$1,200 refund |
| 12% | $2,200 | $1,200 | +$1,000 refund |
| 22% | $2,200 | $2,200 | Even |
| 24% | $2,200 | $2,400 | -$200 owe |
| 32% | $2,200 | $3,200 | -$1,000 owe |
How to Minimize Bonus Tax
- Increase 401(k) contributions in the bonus pay period
- Adjust W-4 withholding to account for the extra income
- Make estimated tax payments if you know you will owe
- Consider charitable deductions to offset
- Delay bonus to next year if you are near a bracket threshold
Frequently Asked Questions
Is a bonus taxed at a higher rate?
Bonuses are taxed at the same rate as regular income. Only the withholding rate is different (22% flat).
Will I get a refund on my bonus tax?
Depends on your bracket. If you are below the 22% bracket, yes. If above, you may owe.
Do bonuses count toward 401(k) match?
Depends on your employer. Many include bonuses in eligible compensation.
Are bonuses subject to Social Security tax?
Yes - bonuses are wages and subject to FICA (7.65%) up to the Social Security wage base.
What if my bonus is over $1 million?
Bonuses over $1 million use a 37% mandatory withholding rate.
Should I take a bonus or commission?
Tax treatment is the same (both supplemental wages). Choose based on your compensation structure.