How Bonuses Are Actually Taxed
The most persistent myth in personal finance is that bonuses are "taxed at a higher rate." They are not. At filing time, a bonus is ordinary income, taxed in exactly the same brackets as your salary. What is different — and what makes the bonus check look so light — is how the money is withheld on the way to you. This guide walks through the mechanics, and our bonus tax calculator will run your own numbers with 2026 rates.
Bonuses are "supplemental wages"
The IRS treats pay outside your regular wages — bonuses, commissions, severance, cashed-out vacation, RSU vests — as supplemental wages, and gives employers two ways to withhold federal income tax on them. The first, and by far the most common for a standalone bonus check, is the percentage method: a flat 22% comes off the top, no matter what your actual tax bracket is. The second is the aggregate method: the bonus is added to a regular paycheck and withholding is computed on the combined amount from the normal tables, which usually takes out more because the tables treat the inflated paycheck as if you earned that much every period.
One rule is not optional: once your supplemental wages for the year pass $1 million with one employer, everything above that line must be withheld at 37%, the top federal rate.
Why the flat 22% surprises people in both directions
Whether 22% over- or under-withholds depends entirely on your marginal bracket. If your top dollars are taxed at 12%, the flat 22% takes out too much and the difference comes back as a refund when you file. If you are in the 32% or 35% bracket, the flat 22% takes out too little, and the shortfall becomes a bill in April — a recurring surprise for people whose bonus is a large share of their pay. The bonus was never taxed at a special rate either way; the withholding was simply a rough prepayment, trued up on your return.
FICA always applies
Social Security and Medicare come out of a bonus just like regular wages: 6.2% Social Security on wages up to the $184,500 wage base for 2026, and 1.45% Medicare on every dollar, plus an additional 0.9% withheld once your total wages for the year pass $200,000. Timing can matter here: if your regular salary has already crossed the Social Security wage base by the time the bonus pays out, the 6.2% simply does not apply to it, and a December bonus can net meaningfully more than the same bonus paid in March.
A worked example
Take a $10,000 bonus paid to someone who has earned $60,000 so far this year, in a state with no wage income tax. Federal withholding at 22% is $2,200. FICA adds $765. The check that arrives is about $7,035 — roughly 70% of the headline number, before any state withholding. In a state like California, another 10.23% comes off; in New York, 11.7%. That is how a "ten thousand dollar bonus" becomes a six-and-change deposit without any special bonus tax existing at all.
State withholding is a patchwork
States handle supplemental wages three different ways. Most publish their own flat supplemental rate — California's is 10.23% for bonuses and stock options, New York's is 11.7%, and rates elsewhere are generally lower. A handful define withholding as a percentage of your federal withholding. Others use only the aggregate method, so the state amount depends on your pay cycle rather than a published rate. And nine states tax no wage income at all, bonuses included. Our calculator encodes each state's 2026 rule from its withholding publication, and our state take-home pages show how regular wages fare in each state.
What you can actually do about it
Not much about the withholding itself — the method is your employer's choice — but three things are worth knowing. First, if the flat rate over-withholds for your bracket, you are making an interest-free loan to the IRS that you reclaim at filing; adjusting your W-4 for the rest of the year can offset it. Second, if you are in a high bracket and the 22% under-withholds, set aside the difference or make an estimated payment so April is not a surprise. Third, remember the true-up cuts both ways: the number that matters in the end is your full-year tax on your full return, which you can approximate with the marginal vs. effective rates guide and the calculators on this site.
Rates cited are 2026 figures from IRS Publication 15 and each state's withholding publication; source URLs are kept with the data in the site repository. This is general information, not tax advice.