Bonus Tax Calculator

The two ways employers withhold tax on a bonus

The IRS calls a bonus a supplemental wage (Publication 15, section 7) and lets your employer pick one of two withholding methods. You don't choose — payroll does — but knowing which one was used explains the number on your payslip.

Flat percentage method. The bonus is paid as a separate check and 22% federal tax is withheld, whatever your salary. Anything above $1 million in supplemental wages for the year is withheld at 37%. This is the simplest option and the one most large employers use.

Aggregate method. The bonus is added to your regular paycheck, and payroll withholds as if you earned that combined amount every pay period. That annualisation pushes the check into much higher brackets, which is why a bonus can come back looking like it lost 35–40%. Payroll then subtracts what your normal paycheck would have withheld, and the rest is charged to the bonus.

Neither method changes what you owe. Both are down payments against the same year-end bill, so an over-withheld bonus turns into a larger refund — which is what the last line of the calculator estimates. To adjust the rest of your year's withholding after a big bonus, use the W-4 withholding calculator.

Bonus after tax with the flat 22% method

Before state tax: the flat method leaves about 70.35% of any bonus. Add your state rate to see the real figure — nine states withhold nothing at all, listed on the no income tax states page. Severance and retroactive raises are withheld the same way, which is why the severance calculator and retro pay calculator use the same 22% rate.

How to keep more of your bonus

• Send part of it to your 401(k). Most payroll systems let you set a separate bonus deferral percentage. It lowers the federal tax on the bonus immediately — the 401(k) calculator shows the trade-off against take-home pay.
• Check the pay date. A bonus paid in January instead of December falls in a different tax year, which matters if your income is very different between the two.
• Don't fix your W-4 for one bonus. Extra allowances filed to offset one payment keep applying to every later paycheck. Check the projection first.
• Confirm your real refund position. A big over-withheld bonus often means a larger refund; the tax refund estimator puts a number on it.

Bonus tax FAQ

How much tax is taken out of a bonus?

If your employer pays the bonus separately, federal withholding is a flat 22% of the bonus (37% on any part above $1 million), plus 7.65% for Social Security and Medicare and any state income tax. That's withholding, not your final tax bill — most people get part of it back when they file.

Are bonuses taxed at a higher rate than salary?

No. A bonus is ordinary income and is taxed at exactly the same rates as your salary once you file. It only looks higher because the flat 22% supplemental withholding rate is often above the marginal rate someone actually pays, so too much is held back up front.

What is the difference between the flat and aggregate methods?

The flat percentage method treats the bonus as a separate payment and withholds 22%. The aggregate method adds the bonus to your regular paycheck, works out the withholding as if you earned that much every pay period, and subtracts your normal withholding. The aggregate method usually withholds more for high earners and less for lower earners. Your employer chooses which one to use.

Will I get some of my bonus tax back?

Usually yes, if your marginal rate is below 22%. The calculator compares the 22% withheld with the federal tax the bonus really adds to your year, and shows the difference as a likely refund. If your marginal rate is 24% or higher, you may owe a little extra instead.

Can I avoid tax on my bonus?

You can't avoid it, but you can defer it. Directing part of the bonus into a traditional 401(k) or HSA lowers the taxable amount for the year; some employers also let you choose the pay date, which can move the income into a lower-income year. Social Security and Medicare are still withheld on 401(k) contributions.

Why was my bonus taxed at 40%?

That's usually the aggregate method. Annualising a big one-off check pushes it into much higher brackets for that single paycheck, so the withholding can look like 35–40%. Nothing is lost — the excess comes back as a refund when you file your return.