What comes off a bonus
A bonus paid on its own is “supplemental pay”, and most employers use the IRS’s flat rate:
| Taken off | Rate |
|---|---|
| Federal income tax | 22% (37% on the part over $1 million) |
| Social Security | 6.2%, up to the yearly wage base |
| Medicare | 1.45% |
| State income tax | Depends on the state |
Example: a $5,000 bonus in Texas, which has no state income tax: $1,100 federal tax, $310 Social Security and $72.50 Medicare. You receive $3,517.50.
States have their own rules. California withholds 10.23% from bonuses, for example, while others use their normal tables. Here’s what comes out of the same bonus in different states:
On a $5,000 bonus, $1,100 of federal income tax and $383 of Social Security and Medicare come out in every state. What the state takes, for a single filer earning $75,000:
| State | State and local | You take home |
|---|---|---|
| Texas | – | $3,518 |
| Florida | – | $3,518 |
| Arizona | $100 (2.00% flat rate) | $3,418 |
| Ohio | $138 (2.75% flat rate) | $3,380 |
| Pennsylvania | $157 (3.07% flat rate) | $3,361 |
| North Carolina | $205 (4.09% flat rate) | $3,313 |
| Colorado | $242 | $3,276 |
| Illinois | $248 (4.95% flat rate) | $3,270 |
| Georgia | $250 (4.99% flat rate) | $3,268 |
| Massachusetts | $273 (5.00% flat rate) | $3,245 |
| New Jersey | $352 | $3,165 |
| California | $577 (10.23% flat rate) | $2,941 |
| New York | $632 (11.70% flat rate) | $2,886 |
Some employers use the aggregate method instead: they add the bonus to a regular paycheck and withhold as if you earned that much every pay period. That can take even more at first, but it evens out the same way when you file.
Do you really pay more tax on a bonus?
No. When you file, your bonus is added to the rest of your income and taxed at your normal rates. The 22% is just an estimate taken up front.
- $5,000 bonus on $50,000 $500 less
- Withheld at 22%: $1,100 Tax it really adds: $600
- $10,000 bonus on $90,000 No change
- Withheld at 22%: $2,200 Tax it really adds: $2,200
- $20,000 bonus on $150,000 $400 more
- Withheld at 22%: $4,400 Tax it really adds: $4,800
In the 12% bracket you get money back; in the 24% bracket you owe a little more
Social Security and Medicare are the same either way. Where the tax you owe is less than what was withheld, the difference comes back as part of your refund.
- In the 12% bracket, 22% is too much: on a $5,000 bonus with a $50,000 salary, $1,100 was withheld but the bonus only adds $600 of tax. The $500 comes back in your refund.
- In the 22% bracket, it’s about right.
- In the 24% bracket or higher, 22% is too little: on a $20,000 bonus with a $150,000 salary, you’ll owe about $400 more.
Bonus or raise?
A $5,000 bonus and a $5,000 raise are taxed the same in the end. The difference is timing: a bonus is withheld at the flat rate in one go, while a raise is spread across your paychecks at your normal withholding. A raise also repeats every year and can lift your 401(k) match and future raises, so it’s usually worth more over time.
Keeping more of your bonus
- Put some into your 401(k), if your plan lets you contribute from bonuses. That part isn’t taxed now.
- Max out your HSA, if you have one.
- Big bonus and a high income? Consider paying a little extra estimated tax, or raising your W-4 withholding, so you don’t owe a surprise bill in April.
See your own numbers
The bonus tax calculator shows what’s withheld from your bonus in your state, what you’ll take home, and how much you’ll get back or owe when you file.