How bonuses are taxed
The IRS calls bonuses, commissions, overtime paid separately and back pay supplemental wages. They are taxed as ordinary income, the same as your salary, but your employer can withhold federal income tax from them in a simpler way. Social Security (6.2%) and Medicare (1.45%) come out exactly as they do from regular pay.
Flat 22% or aggregate method
When a bonus is paid separately from your regular pay, or the pay stub shows it separately, your employer can choose between two methods (IRS Publication 15, 2026):
- Percentage (flat rate) method: withhold a flat 22% of the bonus, whatever your W-4 says. This is what most payroll systems do. Above $1 million of supplemental wages in a year, the excess is withheld at 37%.
- Aggregate method: add the bonus to a regular paycheck, figure withholding on the total as if it were one normal paycheck, and subtract what would have been withheld from the regular pay alone. Because the payroll tables treat that one large paycheck as if you earned it every pay period, this method often withholds more than 22%.
Flat method: take-home = bonus − 22% federal − 6.2% Social Security − 1.45% Medicare − state and local tax
Worked example
A $5,000 bonus paid separately, flat method, in a state with no income tax:
- Federal income tax: 22% × 5,000 = $1,100
- Social Security: 6.2% × 5,000 = $310; Medicare: 1.45% × 5,000 = $72.50
- Take-home: $3,517.50, about 70% of the bonus
Paid with a $2,307.69 biweekly paycheck instead (a $60,000 salary, single, aggregate method), federal withholding on the bonus is about $1,127.46, a little more than 22%, because the payroll tables treat the $7,307.69 paycheck as a $190,000 salary.
Grossing up a bonus
To give someone a set amount after tax, for example a $1,000 gift card or a "$5,000 net" bonus, the employer pays a larger gross bonus that covers the withholding. Choose "the take-home I want" above: with the flat method and no state tax, $1,000 net needs a gross bonus of about $1,421.46, because 29.65% (22% + 6.2% + 1.45%) is withheld.
Will I get the money back?
Possibly. Withholding is a prepayment, not the final tax. When you file your return, the bonus is added to the rest of your income and taxed at your actual rates. If your top bracket is 12%, the 22% withheld was too much and the difference comes back in your refund; if your top bracket is 24% or more, 22% was too little and you may owe. Social Security and Medicare are final, except that Social Security stops for the year once your wages pass $184,500 in 2026.
Commissions, retention and signing bonuses
The same rules cover commissions, sign-on and retention bonuses, awards and prizes paid by your employer, severance, and payouts of unused vacation. Each payment can be withheld at the flat 22% if it is paid or listed separately. Non-cash awards such as a gift card are taxable wages too, which is why employers often gross them up so you are not left paying tax on a gift.
Common mistakes
- Thinking a bonus is taxed at a higher rate. It is only withheld differently. The tax is the same as on any other dollar of salary.
- Forgetting state tax. Many states have their own supplemental rate for bonuses; check your state's withholding guide or your pay stub.
- Ignoring 401(k) deferrals. If your plan takes your contribution percentage from bonuses, that part is not paid to you now, but it also escapes income tax withholding.
This calculator estimates withholding for 2026 bonuses. Your employer's payroll method and state rules decide the exact amount on your pay stub.
Frequently asked questions
How much tax is taken out of a $5,000 bonus?
With the flat method and no state tax: $1,100 federal (22%), $310 Social Security and $72.50 Medicare, so you take home $3,517.50. State tax, if any, comes out on top.
What is the federal tax rate on bonuses in 2026?
Employers withhold a flat 22% on supplemental wages paid separately, or 37% on the part above $1 million in a year. Alternatively they can use the aggregate method with your regular paycheck.
Why was more than 22% taken from my bonus?
Your employer probably used the aggregate method, adding the bonus to a regular paycheck. The payroll tables then treat that paycheck as if you earned it all year, which can push withholding into a higher bracket.
How do I gross up a bonus?
Divide the net amount by 1 minus the total withholding rate. With 22% federal and 7.65% FICA, $1,000 net needs $1,000 ÷ 0.7035 = $1,421.46 gross. The calculator also handles state tax and the Social Security cap.
Are bonuses taxed differently in my state?
Many states set their own flat withholding rate for bonuses, and some use the regular tables instead. States with no wage tax, such as Texas and Florida, withhold nothing. Check your state's withholding guide or a recent pay stub.
Sources
- Internal Revenue Service. Publication 15 (2026), Employer's Tax Guide, section 7: Supplemental Wages (22% and 37% rates, aggregate procedure).
- Internal Revenue Service. Publication 15-T (2026): Annual Percentage Method tables.
- Social Security Administration. 2026 contribution and benefit base: $184,500.
- Internal Revenue Service. Topic 560, Additional Medicare Tax.
Last reviewed 21 October 2026. Results are estimates; see our disclaimer.