A bonus almost always arrives smaller than expected, and the usual explanation, that bonuses are taxed at a higher rate, is not quite right. Bonuses are withheld differently. The tax you owe on one is the same as on any other dollar you earn, and this bonus tax calculator shows you both what your employer will hold back and why the two numbers are not the same.
That distinction matters, because it means the money is not gone. It is early.
Why 22% never feels like 22%
The flat rate you have read about is a federal income tax rate, and it is not the only thing coming out. Social Security and Medicare take 7.65% on top, which is why the arithmetic disappoints:
- A $10,000 bonus loses $2,200 to federal income tax at the flat rate.
- Social Security takes $620 and Medicare $145.
- You keep $7,035, so the federal withholding rate is really 29.65%, not 22%, and that is before your state has taken anything.
Add state tax and it moves again. The same $10,000 bonus loses another $880 in California and $540 in New York, both states applying their own flat supplemental rate.
Two methods, and your employer picks
This is the part worth knowing before you compare notes with a colleague and find your numbers do not match. Both methods are legal, and the choice is your employer’s.
The percentage method
Your bonus is taxed on its own at a flat 22%, ignoring your W-4 completely. It is simple, predictable, and usually the gentler of the two.
The aggregate method
Your bonus is added to a regular paycheck and withheld as though you are paid that much every period. One good month gets treated as a permanent raise, so it lands you higher on the withholding table.
On a $25,000 bonus against a $95,000 salary, the percentage method withholds $5,500 in federal tax and the aggregate method withholds $8,215. That is a $2,715 difference on the same bonus, decided entirely by which button payroll pressed.
Take a breath before you plan around the number. Neither method changes what you actually owe. If too much was withheld, it comes back as a refund when you file. Nothing has been taken from you permanently, and switching the method above shows you the spread you are working with.
The rate that is not optional
Once the supplemental wages you have been paid in a calendar year pass $1 million, the rate on the excess rises to 37% and your employer no longer has a choice about it. Below that threshold the year-to-date field makes no difference, so leave it at zero unless it applies to you.
Getting a number you can rely on
Pick your state, since supplemental rates vary from nothing to nearly 11%. Ask payroll which method they use if you can, and if you cannot, run both and treat the aggregate figure as your worst case. Commissions, severance, back pay and prizes are all withheld the same way, so this works for those too.
If the bonus came with a raise attached, the pay raise calculator shows what the ongoing part is worth, and the take-home pay by state calculator covers what your regular paycheck looks like the rest of the year.
Bonus tax calculator FAQ
At the flat percentage method, 22% federal income tax plus 7.65% for Social Security and Medicare, so about 29.65% before state tax. On a $10,000 bonus that leaves $7,035 in a state with no income tax. The aggregate method usually withholds more.
It is withheld high rather than taxed high. Your employer either applies a flat 22% or adds the bonus to a paycheck and withholds as though you earn that much every period. Neither changes what you owe for the year, so over-withholding returns to you as a refund.
The percentage method taxes the bonus on its own at a flat 22%. The aggregate method combines it with a regular paycheck and withholds at your annualized rate. On a $25,000 bonus against a $95,000 salary the difference is $5,500 against $8,215 in federal withholding.
About $7,035 in a state with no income tax, using the flat method. In California expect around $6,155 and in New York around $6,495, since both apply a state supplemental rate on top. Enter your state above for your own figure.
If more was withheld than you owe, yes, as part of your refund when you file. Withholding is an estimate paid in advance, not a separate tax, so the bonus is ultimately taxed at your normal rates like any other income.