How Bonus Tax Withholding Works in the United States

Why your bonus check looks smaller than expected — and how the 22% and 37% flat withholding rates actually work.

By US Payroll & Tax Research Analyst · Published: June 28, 2026 · Updated: July 25, 2026

Supplemental Wages: The Special Category

The IRS categorizes bonuses, commissions, overtime pay, and certain other payments as supplemental wages. These are treated differently from your regular salary for withholding purposes. The IRS allows two methods for withholding tax on supplemental wages:

Method 1: Percentage Method (Flat Rate)

This is the most common method. The IRS sets a flat 22% withholding rate for supplemental wages paid separately from regular wages. For high earners, a 37% rate applies when supplemental wages exceed $1 million in a calendar year.

Method 2: Aggregate Method

When supplemental wages are paid together with regular wages in the same pay period, employers may use the aggregate method. This combines the bonus with your regular wages and withholds as though the entire amount were a regular payment. This can result in a lower or higher withholding depending on your regular tax bracket.

The 22% Flat Rate: How It Works

For bonuses paid separately from your regular paycheck, the default withholding rate is 22%. Here's how this works with a $5,000 bonus:

As you can see, the 22% federal withholding alone takes $1,100 from a $5,000 bonus. Add FICA and state tax, and your net bonus can be 25-37% less than the gross amount, depending on your state.

The 37% Rate for High Earners

If you receive more than $1 million in supplemental wages in a calendar year, any amount above that threshold is subject to a 37% flat withholding rate (the maximum federal rate for 2026). This 37% rate is applied after the first $1 million has already been taxed at the 22% rate.

For example, if you receive $1.2 million in total supplemental wages (multiple bonuses + commissions combined):

Why the 22% Rate Often Seems Too High

The 22% flat rate is a withholding rate, not your actual tax rate. Here's the key insight:

• The IRS withholds taxes at a higher flat rate on supplemental wages to ensure adequate withholding
• When you file your annual tax return, your actual tax liability is calculated using the progressive brackets
• If your effective tax rate is lower than 22%, you'll get the excess withholding back as a tax refund
• If your effective rate is higher than 22%, you may owe additional tax

For example, if your effective federal tax rate is 15% and you had $1,100 withheld from a $5,000 bonus, your actual tax on that bonus would be $750 (15% of $5,000). You'd get $350 back when you file your tax return.

The Aggregate Method: When It's Better

Some employers combine your bonus with your regular paycheck and use the aggregate method. Under this approach, the bonus is treated as part of your regular wages for that pay period, and tax is withheld at your normal rate.

Example: $5,000 regular salary + $5,000 bonus = $10,000 combined biweekly payment. Withholding is calculated on $10,000 using the biweekly withholding tables. For a single filer earning $60K/year, this might result in approximately $1,600 withheld instead of $2,300 (22% of $10K).

The IRS allows employers to choose either method, but once chosen, the method must be applied consistently to all supplemental wages for that employee for the rest of the calendar year.

State Tax on Bonuses

State tax treatment of bonuses varies:

FICA Tax on Bonuses

Bonuses are subject to FICA tax just like regular wages. The 6.2% Social Security tax applies up to the $168,600 wage base (2026), and the 1.45% Medicare tax applies to all bonus income with no cap. High earners also pay the additional 0.9% Medicare surtax on bonuses over $200,000 (single) or $250,000 (married).

Calculate Your Bonus Take-Home

Use our dedicated Bonus Tax Calculator to see exactly how much of your bonus you'll keep after all federal, state, and FICA withholding.

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