How Much Are Bonuses Taxed? Federal, State, and FICA Rates

Bonuses are usually taxed at a flat 22% for federal income tax withholding, plus 6.2% for Social Security and 1.45% for Medicare, which puts the minimum federal bite at roughly 30% before any state or local tax comes off the top. That 22% is a withholding rule, not a special tax rate on bonuses. Your actual tax on the bonus is settled when you file your return, based on your total income for the year, and can end up higher or lower than what came out of the check.

The 22% Flat Federal Withholding Rate

The IRS classifies a bonus as supplemental wages, a category that also covers commissions, signing bonuses, severance, back pay, reported tips, and overtime. When your employer pays the bonus as a separate check, or combines it with your regular pay but identifies the bonus amount, they can use the percentage method: a flat 22% for federal income tax on the first $1 million of supplemental wages in the calendar year.¹

The 22% doesn’t budge based on your W-4. It’s always 22% under this method, whether your regular paychecks are withheld at 10% or 32%. That’s why the bonus check often looks like it lost more than a normal paycheck: the flat rate ignores the allowances and adjustments that lower withholding on your salary.

When the Bonus Rides With Your Regular Paycheck

If your employer lumps the bonus into a normal paycheck without breaking it out, the payroll system uses the aggregate method instead. It treats the combined amount as one regular paycheck and withholds using the standard tables and your W-4.²

Mechanically, the employer adds the supplemental wages to the period’s regular wages, calculates withholding as if you earn that inflated total every pay period, then subtracts what would have been withheld on the regular pay alone. The remainder is what comes off the bonus.¹

The catch: if you normally earn $3,000 biweekly and a $10,000 bonus lands in the same check, the system briefly treats you as if you earn $13,000 every two weeks, roughly $338,000 a year, and withholds at that projected bracket. The result is often heavier withholding than the flat 22% would produce. The extra comes back when you file.

Social Security and Medicare Also Come Out

Federal income tax isn’t the only piece. FICA taxes apply to a bonus at the same rates as regular pay: 6.2% for Social Security and 1.45% for Medicare, or 7.65% combined.³

Social Security tax stops for the year once your total wages hit the wage base limit, which is $184,500 for 2026.⁴ After that, the 6.2% no longer applies to additional wages, including a bonus. Medicare has no cap. Every dollar is subject to 1.45%.

Higher earners pay an Additional Medicare Tax of 0.9% on wages above certain thresholds:⁵

$200,000 for single filers or head of household
$250,000 for married filing jointly

Employers begin withholding the 0.9% once your wages pass $200,000 in a calendar year no matter your filing status.³ Married joint filers whose combined household wages stay under $250,000 can recover any excess on their return.

State and Local Taxes Add Another Layer

After federal and FICA come state and, in some places, local taxes. The rules are not uniform. Nine states have no income tax on wages. Others apply a flat supplemental withholding rate to bonuses; some use their regular graduated brackets; a few require the aggregate method. Cities and municipalities can pile on their own income tax based on where you work or live.

If you live in one state and work in another, a reciprocity agreement between them may keep you from being withheld twice. Because the range is so wide, the rate that applies to your bonus is a question for your state tax agency or your payroll department.

Bonuses Over $1 Million

Once your total supplemental wages from an employer exceed $1 million in a calendar year, the amount above $1 million is withheld at 37%, the top federal rate, and your W-4 has no effect on that.¹ The first $1 million still follows the 22% flat rate under the percentage method; only the excess triggers the 37%.

Non-Cash Bonuses and Gift Cards Count Too

If the bonus is a trip, electronics, or another prize instead of cash, the fair market value goes on your W-2 and is taxed like wages.⁶ The employer still owes federal income tax withholding, Social Security, and Medicare on that value.⁷

Gift cards trip people up. Even a small one is treated as a cash equivalent and is fully taxable. It doesn’t fall under the de minimis fringe benefit exclusion that covers minor perks like occasional snacks.⁸ A $50 holiday gift card should show up in your taxable wages.

What Withholding Isn’t

The 22% is a placeholder, not a verdict. When you file your Form 1040, the IRS applies the actual brackets to your total income. For 2026, federal rates run from 10% to 37%.⁹ Your bonus doesn’t get taxed at a special rate. It stacks on your other earnings and is taxed at your marginal rate.

What that means for you:

If your marginal rate is below 22%, you were over-withheld and the excess comes back as part of your refund.
If your marginal rate is around 22%, the withholding was roughly on target.
If your marginal rate is above 22%, you were under-withheld and will owe the difference at filing, and a large enough shortfall can trigger a penalty.

The aggregate method can push the opposite way, temporarily withholding more than needed because the payroll math inflates your projected annual income. Either way, the return is where it gets reconciled.

Ways to Reduce the Tax Hit

Because a bonus is ordinary income, the same moves that lower tax on regular pay lower tax on a bonus. The lever is pre-tax contributions.

Increase your 401(k) deferral before the bonus is paid. The 2026 limit is $24,500, or $32,500 if you’re 50 or older. Contributions come out before income tax withholding.¹⁰
Contribute to a Health Savings Account through payroll if you have a high-deductible health plan. The 2026 limits are $4,400 for self-only coverage and $8,750 for family coverage.¹¹
Use Step 4(c) on Form W-4 to request extra withholding per paycheck if you know your marginal bracket is above 22% and you expect a large bonus. That spreads the shortfall over remaining pay periods instead of leaving a lump sum at filing.²

Avoiding an Underpayment Penalty

A big bonus can push your total tax past what your regular withholding was set up to cover. If it does, the IRS can charge an underpayment penalty. You avoid it if any of the following applies:¹²

You owe less than $1,000 after withholding and credits.
Your withholding and estimated payments cover at least 90% of the current year’s tax.
Your payments equal or exceed 100% of last year’s tax. The threshold is 110% if your prior-year adjusted gross income was over $150,000, or $75,000 if married filing separately.

After a large bonus, run the numbers through the IRS withholding estimator. If it flags a shortfall, cover it with a quarterly estimated payment or bump withholding on the paychecks left in the year through a new W-4.

1
Internal Revenue Service. Publication 15 (2026), (Circular E), Employer’s Tax Guide
2
Internal Revenue Service. Form W-4 (2026)
3
Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
4
Social Security Administration. Contribution and Benefit Base
5
Internal Revenue Service. Questions and Answers for the Additional Medicare Tax
6
Internal Revenue Service. Publication 525 (2024), Taxable and Nontaxable Income
7
eCFR. 26 CFR 1.74-1 – Prizes and Awards
8
Office of the Law Revision Counsel. 26 USC 132 – Certain Fringe Benefits
9
Internal Revenue Service. 2026 Publication 15-T
10
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
11
Internal Revenue Service. Notice 26-05
12
Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty