How Are Bonuses Taxed?

A bonus is taxed as ordinary income, exactly like your salary, so there is no special bonus tax bracket. What feels different is the withholding. Employers usually hold back a flat 22 percent of a bonus for federal income tax, or fold it into your regular pay and withhold on the total. Heavier withholding at bonus time does not mean a higher tax rate, and any extra comes back as a refund when you file.

How Are Bonuses Taxed?

The short answer is that a bonus is taxed the same way as your wages. The IRS treats a bonus as a type of pay called supplemental wages, and supplemental wages are ordinary income. There is no separate, higher bracket that applies just because the money arrived as a bonus. When you file your return, your bonus is simply added to everything else you earned and taxed at your regular marginal rates.

What trips people up is withholding. Withholding is the money your employer sets aside from a paycheck and sends to the IRS on your behalf during the year. Because a bonus is paid separately from or on top of your normal salary, employers are allowed to withhold on it using special rules for supplemental wages. Those rules often pull out a larger slice than you would see on an ordinary paycheck, which is why a bonus can feel like it is taxed more even though the underlying tax rate has not changed. To see how a bonus fits into your yearly earnings, the Salary Calculator can put the amount in context with your base pay.

Withholding Is Not the Same as Your Tax Rate

This is the single most important idea on the page, so it is worth stating plainly. The percentage taken out of your bonus is a withholding rate, not a tax rate. The two are different things. Your tax rate is set by the tax brackets and by your total income for the year. Withholding is just an estimate of what you will owe, collected in advance so you are not hit with one large bill in April.

If your employer withholds more from your bonus than you ultimately owe, the difference does not disappear. It is credited toward your total tax when you file, and any overpayment comes back as a refund. The reverse is also possible: if too little was withheld overall, you may owe a balance. Either way, the bonus is not taxed at a punitive rate. It is only the timing and size of the withholding that make it look that way. To see how the brackets actually set your rate, our sibling guide on marginal versus effective tax rates explains the difference.

The Two Withholding Methods: Flat and Aggregate

Employers generally choose between two IRS-approved methods to withhold federal income tax on supplemental wages such as bonuses. The method your employer uses helps explain the number you actually see.

The Percentage (Flat) Method

When a bonus is paid separately from regular wages, or is clearly identified as separate, the employer can apply a flat percentage. For supplemental wages up to 1 million dollars in a year, that flat federal rate is 22 percent. Amounts above 1 million dollars are withheld at a higher flat rate. This method is simple and predictable: 22 percent of the bonus goes to federal income tax withholding, before Social Security and Medicare are figured in.

The Aggregate Method

The other option is the aggregate method. Here the employer combines your bonus with your most recent regular paycheck, looks up the withholding on the combined total as if it were one payment, subtracts what was already withheld on the regular wages, and withholds the remainder from the bonus. Because a single large combined paycheck can push into higher withholding tables, the aggregate method sometimes withholds more than a flat 22 percent, especially for higher earners. It is not a higher tax, only a different way of estimating the prepayment.

Worked Example: A 10,000 Dollar Bonus Under the Flat Method

Numbers make this concrete. Suppose you receive a 10,000 dollar bonus paid separately from your salary, and your employer uses the flat percentage method. The table below shows each amount withheld and the net you would take home from the bonus. The figures are illustrative, use current standard rates, and ignore state income tax, which many states also withhold.

Add the three withholdings and 2,965 dollars is set aside, leaving 7,035 dollars. Notice that the 2,200 dollars for federal income tax is a prepayment. If your true tax on that bonus works out to less than 2,200 dollars once your whole year is totaled, the difference returns to you at filing. The chart below shows how the 10,000 dollars divides between the money you keep and the pieces withheld.

FICA Still Applies: Social Security and Medicare

Federal income tax is only part of the picture. A bonus is also subject to FICA taxes, the payroll taxes that fund Social Security and Medicare. The IRS sets these rates: Social Security is withheld at 6.2 percent of wages up to an annual wage base limit, and Medicare is withheld at 1.45 percent with no wage limit. Employers match both amounts. A bonus counts as wages for FICA, so these percentages come out regardless of which income tax withholding method your employer uses.

High earners see one more wrinkle. An Additional Medicare Tax of 0.9 percent applies to wages above a threshold set by the IRS, withheld once your pay for the year crosses that line. For most people receiving a typical bonus, the two headline FICA numbers, 6.2 percent and 1.45 percent, are what matter. Because bonuses are ordinary wages and salaries in the eyes of the IRS, they sit in the same income category as your regular pay.

Why Your Bonus Withholding Often Comes Back

Here is the reassuring part. If the flat 22 percent held back is more than your marginal rate on that income, you have effectively overpaid on the bonus, and that overpayment is settled on your tax return. The chart below contrasts what was withheld on the example bonus with an illustration of a lower actual tax, showing the gap that would return as part of a refund.

The exact gap depends on your situation. Someone in a low bracket may get most of the federal withholding back, while someone whose top dollars are taxed above 22 percent could owe a little more at filing. That is the point: the 22 percent is a placeholder, and your return does the real reconciling. To see how a bonus lands in your paycheck after all withholding, our sibling walkthrough on how to calculate take-home pay shows the full sequence.

How to Plan for Bonus Taxes

You cannot change the fact that a bonus is taxable, but you can avoid surprises. Remember that the amount withheld is not the amount you owe, so a big withholding does not mean the money is gone for good. If you routinely receive large bonuses, review your Form W-4 with your employer, since adjusting your withholding across the year can smooth out an unexpected bill or an oversized refund.

For a quick estimate of what a specific bonus leaves in your pocket, run it through a dedicated Bonus Calculator and compare the flat and aggregate outcomes. Treating a recurring bonus as part of your annual income planning, rather than a one-off windfall, keeps the tax side predictable.

FAQs About Bonus Taxes

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Educational note: This article is general information and is not tax, financial, or legal advice. Withholding rates, wage base limits, and tax brackets change and depend on your situation, and the difference between what is withheld from a bonus and the tax you actually owe is settled only when you file your return. Confirm current figures on the IRS website and consult a qualified tax professional before making decisions about your withholding or return. Reviewed for accuracy by Prof. Dr. Khalil Mudassar, PhD, as part of our editorial review process. Content last reviewed September 10, 2026.