How are bonuses taxed? Why your bonus check looks smaller

A bonus is taxed as regular income, but the paycheck it comes in looks smaller because employers usually withhold a flat 22% for federal income tax, plus Social Security, Medicare, and any state tax. That withholding is only a prepayment. Your real tax is settled when you file your return.

Are bonuses taxed at a higher rate?

No. There is no special "bonus tax rate." A bonus is added to your other pay for the year and taxed in the same brackets. What is different is how much your employer holds back from the bonus check. The IRS calls bonuses "supplemental wages," and IRS Publication 15 gives employers two ways to withhold on them.

The two ways employers withhold on a bonus

The flat rate is the common choice because it is simple. Under the aggregate method, the bonus check can be withheld at a steeper rate, since the payroll system treats that one paycheck as if you earn that much every pay period.

The $1 million rule

If one employer pays you more than $1 million in supplemental wages in a calendar year, the amount above $1 million must be withheld at 37%. This does not affect most people.

Do you also pay Social Security and Medicare on a bonus?

Yes. Bonuses are subject to Social Security tax (6.2%) and Medicare tax (1.45%), the same as your regular pay. Social Security stops once your wages reach the yearly limit, which is $184,500 for 2026 (IRS Topic 751). Many states also withhold state income tax on bonuses, some at a flat rate. States with no income tax, such as Texas, take nothing.

A worked example: a $5,000 bonus

Take a $65,000 salary in Texas, single filer, no pre-tax deductions. Your employer pays a $5,000 bonus as a separate payment using the flat rate. These are our own 2026 estimates, not a pay stub:

That looks like 30% gone. But when we run the numbers for the full year, the bonus raises your federal income tax by about $950, not $1,100. Part of it falls in the 12% bracket and part in the 22% bracket. So about $150 of the withholding comes back to you as a larger refund or a smaller bill when you file. Your true after-tax gain from the bonus is about $3,668.

The flat rate can also fall short. At $120,000 your top bracket is already 22%, so a $5,000 bonus adds about $1,164 of federal tax in our estimate, slightly more than the $1,100 withheld. Higher earners in the 24% bracket or above can owe more at filing.

What if you want a specific amount after tax?

Some employers promise a bonus "net" of tax. That is called a gross-up: they raise the pretax amount so you end up with the number you were promised. If your offer says $5,000 after tax, ask whether it is gross or net. The two are very different, and it is worth knowing before you plan how to spend it.

How to keep more of your bonus

• Put some in your 401(k). Ask payroll if you can send part of the bonus to your retirement plan. Pre-tax contributions lower the income that gets taxed. See our lesson on the 401(k) match.
• Check your W-4. If bonuses are a big part of your pay, the IRS Tax Withholding Estimator can show whether your withholding is on track. Our lesson on your W-4 and big refunds explains the form.
• Plan the money before it lands. Decide how much goes to savings, debt, and spending. Our budget planner can help.

To see how a bigger yearly income changes your take-home pay, try our take-home pay calculator.

Frequently asked questions

Why is my bonus taxed so much?

It usually is not taxed more, only withheld more. The flat 22% plus Social Security and Medicare takes about 30% of a typical bonus up front. If your real bracket is lower than 22%, you get the difference back when you file.

How much tax is taken out of a $1,000 bonus?

With the flat rate, about $220 goes to federal income tax and about $76.50 to Social Security and Medicare, so you would get about $703.50 before any state tax. Your actual tax depends on your total income for the year.

Can I ask my employer not to withhold tax on my bonus?

No. Employers must withhold on bonuses, and they cannot use a rate other than 22% under the flat method. You can change your W-4 for future paychecks, but that does not change how a bonus is withheld.

Is a bonus taxed differently from a raise?

The final tax is the same, since both are ordinary income. Only the withholding method differs, because a raise is built into your regular pay.

Bottom line

Bonuses are taxed at your normal rates, but the check shows a flat 22% federal withholding plus payroll taxes. Expect to receive roughly 70% of the bonus up front, and know the true amount is settled when you file.

General information, not tax, legal, or financial advice.

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