How much tax is taken from a bonus?

Q: How are bonuses taxed?

Bonuses can be taxed using two methods: the percentage method (flat 22% federal supplemental tax rate for most taxpayers) or the aggregate method (adding the bonus to regular wages and taxing at your marginal rate). Your employer chooses which method to use.

Q: Why is my bonus taxed at 22% when I'm in a lower bracket?

The 22% flat rate is the default federal supplemental withholding rate. It's a withholding amount, not your actual tax rate. If your actual tax rate is lower, you'll receive the difference as a refund when you file your tax return.

Q: Is the 22% bonus tax rate the same for everyone?

The standard supplemental rate is 22%, but bonuses over $1 million are subject to a 37% rate on the excess. State and local taxes are additional. Some states have their own supplemental withholding rates that apply to bonuses.

Q: Can I reduce taxes on my bonus?

Strategies include: contributing to a 401(k) or traditional IRA to lower taxable income, using the bonus to fund an HSA if eligible, timing deductions, and consulting a tax professional about your specific situation. You can't avoid taxes entirely, but you can minimize them.

Q: Does a bonus affect my tax bracket?

Yes, under the aggregate method, a large bonus could push your total income into a higher marginal tax bracket. However, only the income above the bracket threshold is taxed at the higher rate, not your entire income. Under the percentage method, the flat 22% rate applies regardless of your bracket.

Question

How much tax is taken from a bonus?

Accepted Answer

The IRS supplemental flat rate is 22% for bonuses under $1 million. Employers can also use the aggregate method which combines bonus with regular pay.

🎁 Bonus Tax Calculator