Bonus Tax Calculator

Yes. The IRS classifies bonuses as 'supplemental wages,' which are subject to a flat federal withholding rate of 22% (for amounts up to $1 million) rather than the graduated rates applied to regular wages. This can result in more or less withholding than your actual tax liability depending on your overall income level — you'll true up the difference when you file your annual return.

The percentage method (also called the flat method) withholds a flat 22% federal income tax from your bonus if it is paid separately from your regular paycheck. This is the most common and straightforward approach. For bonuses exceeding $1 million, the rate jumps to 37% on the amount over $1 million.

The aggregate method combines your bonus with your most recent regular paycheck and calculates withholding as if the total were a single payment. This can result in higher withholding if the combined amount pushes you into a higher tax bracket for that pay period. Many employers use the percentage method because it's simpler.

Yes, in most cases. Even if you claim exempt from withholding on your W-4, bonuses paid as supplemental wages are still subject to the 22% federal supplemental withholding rate. The exemption on a W-4 typically applies only to regular wages, not to supplemental pay like bonuses.

Yes, most states tax bonuses as income. Some states have a specific supplemental withholding rate for bonuses (like California's 10.23%), while others apply the same graduated rate used for regular wages. A handful of states — including Texas, Florida, Washington, and Nevada — have no state income tax, so no state withholding applies.

You can reduce the tax impact of a bonus by contributing more to pre-tax accounts like a 401(k) or Health Savings Account (HSA), which lowers your taxable income. Timing also matters — if possible, deferring a bonus to a year when your income is lower could reduce your overall tax liability. However, withholding at the time of payment is unavoidable; any over-withholding will be refunded when you file your return.

The federal supplemental withholding rate for bonuses in 2025 is 22% for amounts up to $1 million. For any bonus amount exceeding $1 million in a calendar year, the portion above $1 million is withheld at 37%. Note that this is a withholding rate, not necessarily your final tax rate — your actual liability depends on your total taxable income for the year.

Yes. In addition to federal and state income taxes, bonuses are subject to FICA taxes: Social Security at 6.2% (up to the annual wage base of $176,100 for 2025) and Medicare at 1.45%. High earners may also owe the Additional Medicare Tax of 0.9% on income above $200,000 (single) or $250,000 (married filing jointly).