Withholding is not the same as tax
A bonus is a supplemental wage. When it is paid, your employer has to guess how much federal income tax to withhold, and the IRS allows two methods. Neither changes the tax you finally owe: at filing, the bonus is simply added to your other wages and taxed at your ordinary brackets. The calculator shows all three numbers side by side.
Method 1: flat-rate (percentage) withholding
If the bonus is paid separately from regular wages (or identified separately), the employer can withhold a flat 22% of it for federal income tax. Once your supplemental wages for the calendar year exceed $1 million, the excess must be withheld at 37% — that part is mandatory, whatever your W-4 says. These rates come from our federal dataset (IRS Publication 15).
The flat rate is simple, but it ignores your situation. If your top bracket is below the flat rate, too much is withheld; if it is above, too little.
Method 2: aggregate withholding
The employer adds the bonus to a regular paycheck and withholds on the total as if that combined amount were your pay every period. Because a $2,500 paycheck plus a $5,000 bonus looks like a much higher annual salary, the aggregate method often withholds at a higher rate than you will owe. Our aggregate column approximates this by annualizing one paycheck plus the bonus with the 2026 brackets and standard deduction; your employer’s Publication 15-T calculation and W-4 entries will differ somewhat.
What you actually owe on a bonus
The third column is the real answer: your full-year tax with the bonus minus your full-year tax without it. It depends on where your salary sits in the brackets — a bonus that pushes income across a bracket edge is taxed partly at each rate. Social Security (until you reach the wage base), Medicare and state taxes apply as they would to any wages.
Worked example: $5,000 bonus on a $65,000 salary
Single filer, paid biweekly, no state income tax — the calculator’s default:
| Flat-rate | Aggregate (approx.) | Actual | |
|---|---|---|---|
| Federal income tax | $1,100.00 | $1,150.54 | $950.00 |
| Social Security + Medicare | $382.50 | $382.50 | $382.50 |
| Net bonus | $3,517.50 | $3,466.96 | $3,667.50 |
The flat method withholds $1,100.00; the bonus actually adds $950.00 to federal income tax. The $150.00 difference comes back as part of your refund. You keep 73.4% of the bonus after all taxes.
What counts as supplemental wages
The flat-rate option applies to more than year-end bonuses. IRS Publication 15 treats these as supplemental wages when paid separately from regular pay:
- Bonuses, awards and prizes
- Commissions
- Overtime pay, when paid separately from regular wages
- Back pay, retroactive raises and severance
- Payments for accumulated sick leave or vacation
- Taxable fringe benefits and reported tips (with special rules)
So the same three-column comparison works for a commission check or a payout of unused vacation.
Bonuses and the Social Security wage base
Social Security tax stops once your wages for the year reach the annual wage base ($184,500 in 2026). If your salary is near that figure, part or all of a bonus may escape Social Security tax; the calculator handles this automatically. Medicare has no cap, and the Additional Medicare Tax applies once your wages pass the threshold for your filing status.
December or January?
A bonus is taxed in the year it is paid. If you expect a much lower income next year — a sabbatical, retirement or a move to a state without income tax — receiving the bonus in January could lower the tax on it; if you expect a higher income next year, December may be better. Most employees cannot choose, but it is worth knowing when negotiating a sign-on or retention bonus.
Ways to keep more of a bonus
- Defer into a traditional 401(k) if your plan allows bonus deferrals, up to the annual limit. That lowers income tax (not FICA). This calculator doesn’t model bonus deferrals.
- Adjust your W-4 if regular withholding plus bonus withholding will clearly over- or under-shoot your annual tax.
- Don’t refuse a bonus to avoid a bracket. Only the dollars above a bracket edge are taxed at the higher rate.
Large or unusual bonuses — stock awards, sign-on bonuses with clawbacks, or payments that cross the $1 million threshold — are worth reviewing with a tax professional.