Why Is My Bonus Taxed So Much? How Bonuses Are Taxed in 2026
By Jhon W · Published 15 October 2026
A bonus is not taxed at a special rate. It is income like your salary, and your tax on it is settled on your return. What makes a bonus check look small is withholding: most employers take a flat 22% for federal income tax, plus 7.65% for Social Security and Medicare, plus state tax.
On a $5,000 bonus with no state income tax, that leaves $3,517.50. In California the same bonus leaves $2,948.38, because 41% of it is withheld in all. Whether that is too much or too little depends on your salary, as the examples below show.
The two ways employers withhold on a bonus
The IRS calls a bonus a supplemental wage. Section 7 of IRS Publication 15 lets an employer that already withholds from your regular pay choose one of two methods:
- The flat rate. When the bonus is paid separately, or shown separately on the pay stub, the employer can withhold a flat 22% and no other percentage. Your Form W-4 is ignored.
- The aggregate method. The employer adds the bonus to the regular wages of the pay period, works out withholding on the total as if it were one paycheck, and subtracts what it withholds from the regular wages alone.
With the aggregate method a large bonus looks like a very high yearly salary for that one paycheck, so withholding can go above 22%. For a single filer paid $2,500 every two weeks, a $5,000 bonus has $1,100.00 withheld at the flat rate and $1,150.54 by the aggregate method.
If the employer withheld nothing from your regular wages in the current or previous year, it must use the aggregate method.
Bonuses over $1 million: 37%
Once your supplemental wages from the same employer pass $1,000,000 in a calendar year, the part above it must be withheld at 37%, whatever your Form W-4 says. Businesses under common control count as one employer for this rule.
Social Security and Medicare on a bonus
Whichever method is used, Publication 15 says supplemental wages are subject to Social Security, Medicare and federal unemployment tax. That is 6.2% for Social Security and 1.45% for Medicare, $382.50 on a $5,000 bonus.
Social Security stops when your wages for the year reach $184,500, so a high earner's year-end bonus may have no Social Security taken. Medicare has no limit, and an extra 0.9% applies to wages above $200,000 in the year.
State tax on a bonus
States that tax wages tax bonuses too, and some set their own flat rate for supplemental pay:
| State | Withholding on a bonus paid separately |
|---|---|
| California | 10.23% for bonuses and stock options; 6.6% for other supplemental pay |
| New York | 11.7% (New York City residents add 4.25%) |
| Virginia | 5.75% |
| Ohio | 2.75% |
| Pennsylvania | 3.07%, the same flat rate as regular pay |
| Illinois | 4.95%, the same flat rate as regular pay |
| Texas, Florida, Tennessee, Nevada, Washington | None: no state income tax on wages |
State payroll deductions apply as well. California's SDI takes 1.3% of a bonus with no wage cap.
What you really owe on a bonus
Withholding is a prepayment. On your return the bonus is added to your other income and taxed at your own rates, after the standard deduction. A bonus that fits inside the 22% bracket is taxed close to the 22% that was withheld; below that you get some back, above it you owe more.
| Salary (single) | Bonus | Withheld at 22% | Tax the bonus adds on the return | Top tax rate |
|---|---|---|---|---|
| $31,200 | $5,000 | $1,100.00 | $600.00 | 12% |
| $65,000 | $5,000 | $1,100.00 | $950.00 | 22% |
| $130,000 | $5,000 | $1,100.00 | $1,200.00 | 24% |
| $234,000 | $10,000 | $2,200.00 | $3,200.00 | 32% |
The tax column comes from the 2026 rate tables and the standard deduction, with no other income, deductions or credits. At $31,200 the bonus adds only $600 of tax, so $500 comes back as a refund. At $234,000, in the 32% bracket, $1,000 more is due than was withheld.
A bonus does not push all your income into a higher bracket. Only the part of income inside a bracket is taxed at that bracket's rate.
How to change the tax taken from a bonus
- You cannot choose the method. The employer decides between the flat rate and the aggregate method. Your W-4 changes only the aggregate method.
- Put part of it in your 401(k). If your plan takes contributions from bonuses, a traditional 401(k) contribution is not subject to federal income tax withholding, so a contribution taken from the bonus lowers the 22%. Social Security and Medicare still apply.
- Expect to owe? Add withholding. If you are in the 24% bracket or higher, ask for an extra amount on Step 4(c) of Form W-4 for the paychecks left in the year. Our guide explains how to fill out Form W-4 step by step.
- Expect a refund? Nothing to do. The extra withholding comes back when you file.
To see your own bonus after tax, both IRS methods side by side and the tax it adds at the end of the year, use our bonus tax calculator.
Frequently asked questions
- Why is my bonus taxed at 22%?
- 22% is the flat federal withholding rate the IRS allows for a bonus paid separately from regular wages. It is withholding, not a special tax rate; your real tax on the bonus is worked out on your return.
- Do I get bonus tax back?
- If your top tax rate is below 22%, usually yes: the extra comes back as a refund. If it is above 22%, you may owe more when you file.
- How much of a $5,000 bonus will I keep?
- $3,517.50 with the 22% flat rate and no state income tax: $1,100.00 of federal income tax and $382.50 of Social Security and Medicare come out.
- Is a bonus taxed more than regular pay?
- No. On the return it is taxed exactly like salary. Only the withholding method differs, which can make the bonus check look taxed more.
- Can I ask my employer to withhold less from my bonus?
- Not at the flat rate, which is fixed at 22%. If your employer uses the aggregate method, your Form W-4 affects it. A 401(k) contribution from the bonus also lowers income tax withholding.
- What is the bonus tax rate over $1 million?
- 37% on supplemental wages above $1,000,000 from the same employer in the calendar year, regardless of Form W-4.