Find out exactly how much of your bonus you keep after federal withholding, Social Security, Medicare, and state taxes. Compare percentage vs. aggregate method.
In 2026, the IRS requires employers to withhold federal income tax from bonuses at a flat 22% supplemental rate for amounts under $1,000,000. For bonuses over $1M, the excess is withheld at 37%. On top of federal withholding, bonuses are subject to Social Security (6.2% up to $184,500 wage base) and Medicare (1.45% on all wages). State income taxes also apply at your state's supplemental rate. Use the calculator above to see your exact take-home for any bonus amount.
Bonuses are classified as supplemental wages — compensation paid in addition to regular pay. The IRS provides two withholding methods for supplemental wages. Under the percentage method (most common), the employer applies a flat 22% federal income tax withholding rate directly to the bonus, regardless of the employee's W-4 elections or regular pay. This makes the calculation simple and predictable.
Under the aggregate method, the employer adds the bonus to the employee's most recent regular paycheck, calculates the combined withholding as if it were a regular paycheck, then subtracts the withholding already taken from the regular portion. This method results in withholding that better reflects the employee's actual marginal rate. For employees in higher brackets (32%, 35%, 37%), the aggregate method withholds more than 22%. For employees in lower brackets, it withholds less.
Pre-tax 401(k) contributions from a bonus reduce the taxable bonus before the 22% withholding is applied. For example, a $5,000 bonus with $2,000 directed to a 401(k) leaves only $3,000 subject to federal income tax withholding, saving $440 in federal withholding. Social Security and Medicare still apply to the full $5,000 gross bonus.
Marcus earns $75,000 annually and receives a $5,000 year-end bonus. He is a single filer in Arizona with no 401(k) contribution from the bonus. His employer uses the percentage method.
If Marcus instead contributed his full $5,000 bonus to his 401(k) pre-tax, he would save $1,100 in federal withholding — effectively investing $5,000 in retirement for an out-of-pocket cost of just $3,392.50 in lost take-home. The government subsidizes $1,607.50 of the contribution through reduced taxes.
Note: If Marcus's salary pushes him above $184,500 in cumulative wages before the bonus, no Social Security applies to the bonus, increasing his take-home to $3,702.50.
22% withholding vs. your actual bracket
The 22% supplemental withholding rate is a flat withholding rate — not necessarily your tax rate. If you are in the 12% bracket, you will overpay by 10 percentage points and receive a refund. If you are in the 24% bracket, you will underpay by 2 points and owe at filing. The withholding is just a down payment on your actual tax. Running the full tax year calculation at tax time settles any difference.
State supplemental withholding rates vary
States have their own supplemental withholding rates that may differ from the state's regular income tax brackets. California withholds 10.23% on supplemental wages, Pennsylvania withholds at its flat 3.07% rate, and New York withholds at the regular graduated rate. The calculator above uses your state's standard income tax rate as an approximation. Check your state's revenue department for exact supplemental withholding rules.
Large bonuses trigger the $1M threshold
For executives and high earners receiving bonuses over $1,000,000, the amount above $1M is withheld at 37% federal. If your regular salary already exceeds $1M, your entire bonus is withheld at 37%. This creates a significant cash flow difference — a $2M bonus would have $1M withheld at 22% ($220,000) and $1M withheld at 37% ($370,000) for a total federal withholding of $590,000.
Sponsored
Connect with a trusted tax filing service and file federal and state returns online.
Get Started FreeWe may earn compensation when you connect with tax services through this site.
Bonuses are considered supplemental wages and are taxed at a flat 22% federal withholding rate in 2026 for amounts under $1,000,000. This is not your marginal rate — it is a mandatory withholding rate required by the IRS for supplemental pay. For bonuses over $1,000,000, the amount above $1M is withheld at 37%. The 22% withholding is just a prepayment — your actual tax liability is determined when you file your return. If your effective rate is lower than 22%, you will receive a refund for the over-withheld amount.
The percentage method withholds a flat 22% federal tax on the bonus. The aggregate method adds your bonus to your most recent regular paycheck, calculates withholding on the total as if it were your regular pay, then subtracts the withholding already taken from your regular paycheck. If your marginal rate is above 22%, the aggregate method withholds more. If your rate is below 22%, the aggregate method withholds less. Your employer chooses the method — you cannot select it — but understanding the difference helps you plan for year-end tax adjustments.
Yes. Bonuses are subject to Social Security (6.2%) and Medicare (1.45%) taxes just like regular wages. Social Security applies up to the annual wage base ($184,500 in 2026). If your regular salary already exceeds $184,500 before the bonus, no Social Security tax applies to the bonus. Medicare applies to all wages with no cap. High earners (over $200,000 single/$250,000 married) also owe an additional 0.9% Medicare surcharge. These FICA taxes appear on your W-2 along with the bonus income.
Yes. Pre-tax 401(k) contributions reduce your taxable bonus dollar-for-dollar. If your employer allows it, directing some or all of your bonus to your 401(k) eliminates federal income tax withholding on that portion. For a $5,000 bonus at the 22% withholding rate, contributing the full $5,000 to a 401(k) saves $1,100 in federal withholding. You still pay Social Security and Medicare on the gross bonus, but the income tax portion disappears entirely for that amount. The 2026 401(k) limit is $23,500 ($31,000 if age 50+).
The 22% federal withholding may not match your actual marginal rate. If you are in the 24% bracket, the bonus was under-withheld by 2 percentage points. Conversely, if you are in the 12% bracket, the 22% withholding means you over-paid and will receive a refund. The withholding is a prepayment estimate — your final tax bill is calculated on your total annual income when you file. If significant bonus income pushes you into a higher bracket, you may owe additional tax at filing. Use the IRS Tax Withholding Estimator mid-year to check if you should submit a new W-4.