How bonuses are withheld
The IRS lets employers withhold on supplemental wages – bonuses, commissions, severance, back pay – in one of two ways:
- Percentage (flat) method – a flat 22% federal income tax when the bonus is paid separately or identified separately. Supplemental pay above $1 million in a year is withheld at 37%, without exception.
- Aggregate method – the bonus is added to a regular paycheck and withheld as if you earned that much every pay period, which often withholds more than 22%.
Social Security (6.2% up to the $184,500 wage base) and Medicare (1.45%) apply either way.
Worked example: $10,000 bonus
$10,000 bonus, $60,000 earned so far, no state income tax
- Federal withholding
- $2,200.0022% flat rate
- Social Security + Medicare
- $765.00
- Share withheld
- 29.65%
- Bonus
- $10,000.00
- Federal income tax (supplemental rate)
- −$2,200.00
- Social Security (6.2%)
- −$620.00
- Medicare (1.45%)
- −$145.00
- Net bonus
- $7,035.00
State tax on bonuses
Many states publish their own supplemental withholding rate – often their flat income tax rate. States without a wage tax (Texas, Florida, Nevada, Washington, Tennessee, South Dakota, Wyoming, New Hampshire, Alaska) withhold nothing. Enter your state’s rate in the calculator; your state paycheck calculator shows the regular-wage withholding.