How bonuses are withheld
The IRS calls bonuses supplemental wages, along with commissions, back pay and severance. Employers can withhold federal tax on them in one of two ways. The percentage method takes a flat 22% of the bonus, whatever your salary, as long as the bonus is paid separately or identified separately on the pay stub. The aggregate method adds the bonus to a regular paycheck and withholds on the total as if that were your normal pay, then subtracts what would have been withheld from the paycheck alone. Supplemental wages over $1,000,000 in a year are withheld at 37%, with no choice of method.
Social Security and Medicare are the same on a bonus as on salary: 6.2% and 1.45%, with Social Security stopping at the wage base. States have their own rules. Some have a flat supplemental rate, and others withhold on the combined paycheck.
A worked example
A $5,000 bonus on a $75,000 salary in California, single, paid every two weeks. At the flat federal rate the bonus loses $1,100 of federal tax, $310 of Social Security, $73 of Medicare and $575 of California tax and disability insurance. That leaves $2,943, or 58.9% of the bonus. Under the aggregate method federal withholding would be $1,164 instead, and the bonus would net $2,879.
Neither number is your final tax. On the return the bonus is simply part of your wages for the year, taxed at the same rates as your salary. If withholding was too high you get the difference back as a refund; if too low, you owe it.
Large bonuses
Above $1,000,000 of supplemental wages in a year the mandatory 37% rate applies to the excess, and Additional Medicare of 0.9% is withheld on pay above $200,000. A $1,500,000 bonus on a $500,000 salary in Texas has $405,000 of federal tax withheld and nets $1,059,750.
Timing a bonus
When a bonus is paid changes the withholding, not the tax. A bonus paid in December counts toward that year's income; one paid in January counts toward the next, which can help if the next year's income will be lower. For most people the difference is small, and the employer decides the date anyway.
The Social Security wage base can make the timing visible on the pay stub. Once wages and bonus for the year pass $184,500, Social Security stops, so a large bonus early in the year means smaller FICA deductions on the paychecks that follow. That money was not saved; it was paid earlier.
What the inputs mean
- Bonus: the gross amount before any deduction.
- Salary and pay frequency: used for the aggregate method, for the Social Security wage base and for state tax.
- Method: ask payroll which one they use. Most employers use the flat rate for a bonus paid on its own.
- State and filing status: the state where you work and the status on your W-4.
Common mistakes
- Reading the withholding as the tax. It is a deposit toward the year's bill.
- Asking for the bonus in a separate check to "pay less tax". The method changes withholding, not the tax you owe.
- Forgetting that a large bonus can push total pay past the Social Security wage base, which lowers later paychecks' FICA.
Bonus tax questions
How much is a $5,000 bonus after taxes?
On a $75,000 salary in California, $5,000 leaves $2,943 when federal tax is withheld at the flat rate. In Texas, with no state income tax, it leaves $3,518.
Why is my bonus taxed so much more than my paycheck?
It usually is not taxed more; it is withheld differently. The flat 22% federal rate can be above or below your real rate, and any difference is settled on your tax return. Paid together with regular wages under the aggregate method, a bonus can look heavily taxed because payroll treats that one large paycheck as if you earned it every pay period.
Can I put my bonus into my 401(k)?
Often, if your plan allows deferrals from bonuses. The amount then skips federal and most state income tax, though Social Security and Medicare still apply. The 401(k) limit for 2026 is $24,500 across all your contributions for the year.
Sources
Rules checked . How we calculate.