Commissions are wages — they are fully subject to federal income tax, Social Security, and Medicare, just like salary. When a commission is paid as a separate check (or separately identifiable from regular pay), employers typically withhold at the 22% flat supplemental rate — the same rate used for bonuses — plus FICA (IRC §3402(q); IRS Pub. 15-T 2026). Commissions above $1 million aggregate supplemental wages in a year are withheld at 37%. Your final liability is your ordinary income tax rate, determined at filing.
Use the bonus tax calculator to estimate your after-tax commission amount, since the IRS treats bonus and commission withholding identically.
How Commission Withholding Works
Employers choose between two methods:
Flat percentage method: Withhold 22% federal income tax on the commission, plus FICA. This is the simpler approach and the default for most separately paid commissions.
Aggregate method: Add the commission to a regular paycheck, annualize the total, compute the tax on the combined amount, and withhold the incremental difference. This often produces higher withholding than the flat method.
The method affects only withholding — your year-end tax is the same either way. If your actual marginal rate is lower than 22%, you may get a refund. If it is higher, you may owe more at filing.
Worked Example: $10,000 Commission on $65,000 Base Salary
Single filer, biweekly pay, no state income tax, paid with the flat 22% method.
Commission withholding breakdown:
| Tax | Rate | Amount Withheld |
|---|---|---|
| Federal income tax (flat) | 22% | $2,200 |
| Social Security | 6.2% | $620 |
| Medicare | 1.45% | $145 |
| Total withheld | — | $2,965 |
| Take-home from commission | $10,000 − $2,965 | $7,035 |
Actual federal tax at filing: The $10,000 commission is added to $65,000 in base salary = $75,000 total wages. Taxable income = $75,000 − $16,100 (standard deduction) = $58,900. The $58,900 falls in the 22% bracket ($50,400–$105,700 for single filers in 2026). The marginal rate on the commission is 22% — matching the flat withholding exactly. No refund or balance due on the commission itself.
For a worker with a $40,000 base salary (marginal rate 12% on the $10,000 commission), the 22% flat withholding overstates the tax by $1,000. They would get that back at filing.
Effective vs. Marginal Rate on Commission
| Base Salary | Taxable after Deduction | Commission Marginal Rate | Flat Withholding | Outcome |
|---|---|---|---|---|
| $25,000 | $8,900 | 10–12% | 22% | Refund likely |
| $45,000 | $28,900 | 12% | 22% | Refund likely |
| $65,000 | $48,900 | 12–22% | 22% | Roughly even |
| $90,000 | $73,900 | 22% | 22% | Even |
| $120,000 | $103,900 | 22% | 22% | Even |
| $130,000 | $113,900 | 24% | 22% | May owe more |
Assumes single filer, no state tax, standard deduction $16,100, no pre-tax contributions.
FICA on Commission: The Social Security Cap
If your total wages (salary + commission) are expected to exceed $184,500 for the year, Social Security tax (6.2%) only applies to commissions earned before you hit that cap. Medicare (1.45%) always applies.
Example: An employee earns $175,000 in salary before a $20,000 December commission:
- By December, $175,000 in wages have been paid. Only $184,500 − $175,000 = $9,500 of the commission is subject to Social Security.
- Social Security on commission: $9,500 × 6.2% = $589
- Medicare on full commission: $20,000 × 1.45% = $290
- Total FICA on commission: $879
Commission-Only vs. Base-Plus-Commission
Commission-only employees receive all compensation as commissions. Their employer withholds as if each commission check is a separate supplemental wage payment (22% federal plus FICA). If their annual income is low, they often overpay through the year and receive refunds.
Base-plus-commission employees have regular salary paychecks that withhold using the graduated withholding tables, plus commission checks that use the flat 22%. The combination sometimes leads to a moderate refund.
Self-Employed Agents and Independent Reps
If you receive a 1099 rather than a W-2 for your commission income, you are self-employed from a tax standpoint. That means:
- Self-employment tax (15.3% on 92.35% of net earnings) instead of the employee FICA split
- Quarterly estimated taxes instead of withholding
- Ability to deduct ordinary business expenses (mileage, phone, professional fees) that reduce net profit
For a direct comparison of W-2 vs. 1099 take-home, see 1099 vs. W-2 take-home pay. For how bonuses are treated by the same withholding rules, see how bonuses are taxed.