Expect roughly 30% of a cash bonus to disappear before it hits your account at the federal level alone: 22% for federal income tax withholding under the standard flat rate, plus 7.65% for Social Security and Medicare. State and local taxes can add several more percentage points. That is how much your bonus will be taxed on the way out, but the withheld amount is a prepayment, not your final tax bill. Depending on where your total income lands for the year, some of it may come back as a refund, or you may owe more.
The 22% Flat Rate on Most Bonuses
The IRS treats bonuses as “supplemental wages,” a category that also covers commissions, overtime, severance, and prizes. When your employer pays the bonus on a separate check, or itemizes it on a combined check, the payroll system can withhold a flat 22% for federal income tax. That rate applies regardless of your salary or what you put on your Form W-4.1Internal Revenue Service. Publication 15 (2026), (Circular E), Employer’s Tax Guide – Section: 7. Supplemental Wages
The math is easy. A $5,000 bonus paid as a separate check means $1,100 goes to federal income tax withholding, and $3,900 remains before FICA and state taxes. Most large employers default to this method because it automates cleanly across the whole payroll.
One exception at the top: if your supplemental wages from a single employer exceed $1 million in a calendar year, every dollar above that line is withheld at 37%. The first million still comes out at 22%.1Internal Revenue Service. Publication 15 (2026), (Circular E), Employer’s Tax Guide – Section: 7. Supplemental Wages
Why Your Bonus Sometimes Gets Hit Harder
If your employer folds the bonus into your regular paycheck without identifying it separately, the payroll system uses the aggregate method instead. It treats the whole check as normal pay, projects it out across the year, and applies the graduated tax brackets to that inflated annual figure.
The result is usually more withholding than 22%. Say your regular biweekly pay is $2,500 and a $5,000 bonus lands in the same check. The system sees $7,500, multiplies by 26 pay periods, and calculates withholding as if you earned $195,000 a year rather than your actual $65,000. The tax rate matching that projected income gets applied, minus what would have been withheld on your regular wages alone. Whatever is left comes out of the bonus.
You are not actually paying more tax under this method. The withholding is just front-loaded. When you file your return with your true annual income, any excess comes back as a refund. The smaller check in the moment is what catches people out.
Social Security and Medicare Come Out Too
Federal income tax withholding is only part of the deduction. Your bonus is subject to FICA the same way your regular wages are.1Internal Revenue Service. Publication 15 (2026), (Circular E), Employer’s Tax Guide – Section: 7. Supplemental Wages
- Social Security: 6.2%, up to the 2026 wage base of $184,500 in combined earnings for the year. Above that, no more Social Security tax applies.2Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
- Medicare: 1.45% of the full bonus, with no cap.1Internal Revenue Service. Publication 15 (2026), (Circular E), Employer’s Tax Guide – Section: 7. Supplemental Wages
- Additional Medicare Tax: an extra 0.9% once your total wages for the year top $200,000. Your employer starts withholding it after your cumulative pay crosses that mark, regardless of your filing status.3Internal Revenue Service. Topic No. 560, Additional Medicare Tax
For someone below the Social Security wage base, FICA takes 7.65% off the bonus. Combined with the 22% federal income tax withholding, roughly 30% is gone before any state or local tax gets its turn.
State and Local Taxes Add More
Many states also withhold on supplemental wages. Some apply a flat rate, generally somewhere between about 1.5% and nearly 12%. Others require the aggregate method with the state’s graduated brackets. A handful of states have no income tax, so no state withholding applies to your bonus at all.
Some cities and counties layer their own income tax on top, typically under 1% up to around 4%. In high-tax areas, total withholding on a bonus can easily reach 35% to 40% once federal, state, and local pieces are stacked.
What You Actually Owe vs. What Was Withheld
The 22% withheld is a prepayment, not your tax rate. Your actual rate depends on where your total taxable income lands in the federal brackets when you file.
If your income for the year puts you in the 12% bracket, 22% was more than needed and the difference comes back as a refund. If you land in the 32% or 35% bracket, 22% fell short and you will owe the gap. Either way, your total tax liability for the year is the same. Only the timing of the payment changes.
If You Expect to Owe More, Get Ahead of It
When you know a large bonus is coming and the 22% won’t cover your real bracket, two options let you close the gap before the return is due.
Add Extra Withholding on Your W-4
Step 4(c) of Form W-4 lets you request an extra flat dollar amount from each paycheck. Bumping that number in the months around a bonus can spread the shortfall across the rest of the year. The form itself points to bonuses as one of the situations this line is meant for.4Internal Revenue Service. Employee’s Withholding Certificate Submit a new W-4 once you have caught up, or the extra withholding will roll into the next year.
Send an Estimated Payment
You can also make a quarterly estimated payment to the IRS using Form 1040-ES. That works well when the bonus arrives in one quarter and you would rather settle up right away than adjust future paychecks. To avoid an underpayment penalty, your combined withholding and estimated payments for the year generally must reach at least the smaller of 90% of your current-year tax or 100% of your prior-year tax. If your prior-year adjusted gross income was over $150,000 ($75,000 if married filing separately), the prior-year safe harbor is 110%.5Internal Revenue Service. Large Gains, Lump Sum Distributions, Etc.
Defer Part of It Into Your 401(k)
Whether your 401(k) deferral rate applies to bonuses depends on your plan document. Many plans include bonuses in eligible compensation, so a 6% deferral election will pull 6% from the bonus as well.6Internal Revenue Service. Fixing Common Plan Mistakes – Correcting a Failure to Effect Employee Deferral Elections That deferral reduces the taxable portion of the bonus and cuts the immediate withholding. Some plans exclude supplemental wages or let you set a separate rate for bonuses, so check the summary plan description or ask HR before payday. If your employer matches contributions, running some of the bonus through the 401(k) can also capture matching dollars you would otherwise leave on the table.7Internal Revenue Service. 401(k) Plan Overview
Stock Awards and Other Non-Cash Bonuses
Restricted stock units, stock options, and physical prizes count as supplemental wages too. When RSUs vest, the fair market value of the shares on that date is treated as income, and your employer withholds the same way as on a cash bonus, typically at the 22% flat rate plus FICA.8Internal Revenue Service. 2026 Publication 15-T – Federal Income Tax Withholding Methods Because no cash is changing hands, many companies sell a portion of the vested shares to cover the withholding and send the proceeds to the IRS. You end up with fewer shares than the full grant.
If You’re a Contractor, Not an Employee
All of the above assumes W-2 employment. If you work as an independent contractor and a client pays you a bonus, the client generally does not withhold federal income tax or FICA.9Internal Revenue Service. Employer’s Supplemental Tax Guide You get the full payment and owe income tax and self-employment tax yourself, usually through quarterly estimated payments. Not setting aside enough can produce a large bill plus underpayment penalties at filing time.