Flat Rate Method: IRS requires 22% federal withholding on supplemental wages (bonuses) under $1,000,000. Most employers use this method.
Enter your bonus amount and annual salary to see exactly how much you take home after the IRS's supplemental wage withholding rules.
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The IRS classifies bonuses as supplemental wages, which can be taxed differently from regular salary. There are two main withholding methods your employer may use — and knowing which one applies to your bonus tells you how much you'll actually receive on payday.
For bonuses under $1 million, the IRS allows employers to withhold a flat 22% for federal income tax — regardless of your actual marginal rate. This is the method most large employers use because it's simple. If your marginal rate is lower than 22%, you'll get a refund at tax time. If it's higher (income above $89,075 for single filers in 2024), you may owe more. State supplemental withholding rates vary: California withholds 10.23% on bonuses, while Texas has none. Use our main paycheck calculator to see your regular paycheck taxes alongside your bonus calculations.
Some employers add the bonus to a regular paycheck and withhold taxes as if that combined amount is your usual pay. This often results in higher withholding because it annualizes the higher combined amount. However, your actual tax liability at year-end is identical under both methods — the difference is only in how much is withheld upfront versus refunded later.
A single filer in New York earning $75,000/year receives a $5,000 bonus. Under the flat rate method: $1,100 federal (22%), $430 NY state (8.6% supplemental rate), $310 FICA (6.2% SS + 1.45% Medicare) = $1,840 total withheld. Take-home: $3,160 — about 63.2% of the gross bonus. The same bonus in Texas would yield $3,590 take-home, since there's no state income tax. For planning vacation payouts or severance, also see the salary paycheck calculator.
Many employees see 30–40% withheld from a bonus and believe they overpaid. In most cases at moderate income levels, the 22% federal flat rate is close to the actual marginal rate, and any difference settles at filing time. Only if your true marginal rate is below 22% (income under ~$47,150 single) will you get a meaningful refund attributed to the flat bonus withholding.
Under the flat rate method, 22% is withheld for federal income tax on bonuses under $1 million. On top of that, your state may withhold a supplemental rate (e.g., California: 10.23%, New York: 8.82%, Oregon: 8%). You'll also pay Social Security (6.2%) and Medicare (1.45%). In a high-tax state, the total withholding on a bonus can reach 38–42%. However, this withholding rate doesn't determine your actual tax — that's calculated at year-end based on your total income. See the paycheck calculator for full-year estimates.
No — bonuses are ultimately taxed at the same marginal rates as regular wages. The confusion arises because the withholding rate at payment time (22% flat federal) can differ from your actual marginal rate. If your marginal rate is 12%, you'll overpay withholding by 10% and receive that difference as a refund when you file. If your marginal rate is 32%, you'll under-withhold and owe more at filing. The total annual tax on $75,000 salary + $5,000 bonus is identical to the tax on $80,000 salary — it's the same income.
One effective strategy is to direct your bonus into a pre-tax 401(k) contribution (if your employer allows it and you haven't hit the $23,000 annual limit in 2024). This reduces your taxable income by the contribution amount. You can also adjust your W-4 withholding allowances temporarily to offset bonus withholding, though this requires careful calculation to avoid under-withholding for the rest of the year. Timing matters too — if you're near a bracket threshold, receiving the bonus in December vs. January of the next year can shift it into a different tax year entirely. Use our tax withholding calculator for guidance.
According to Bureau of Labor Statistics data, cash bonuses are paid to roughly 23% of private-sector employees, with amounts varying widely by industry and role. In financial services, bonuses can equal or exceed base salary. In retail and food service, bonuses are typically $500–$1,500 for hourly workers. The average year-end bonus across all industries is approximately $2,500–$5,000 for non-executive employees, while management-level workers in professional services often receive $10,000–$50,000. Calculate your specific take-home using this calculator, and compare your regular paycheck with the salary paycheck calculator.
Last updated: January 2025
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