Bonus & Supplemental Pay Tax Calculator

Calculate Your Bonus Pay Tax

Results:

State Supplemental Tax Rates: 2024

State Supplemental Tax Rate (2024)
Alabama 5.0%
Alaska No state income tax
Arizona None
Arkansas 4.4%
California 10.23% on bonus and stock options, 6.6% on all else
Colorado None
Connecticut None
Delaware None (Recommended 5% withholding for deferred compensation)
Florida No state income tax
Georgia Varies by wage bracket
Under $8,000: 2.0%
$8,000 – $10,000: 3.0%
$10,000.01 – $12,000: 4.0%
$12,000.01 – $15,000: 5.0%
Over $15,000: 5.49%
Hawaii None
Idaho None
Illinois None
Indiana None
Iowa 6.0%
Kansas 5.0%
Kentucky None
Louisiana None
Maine 5.0%
Maryland Use local tax rate (3.2% for MD residents working in non-reciprocal states)
Massachusetts None
Michigan None
Minnesota 6.25%
Mississippi None
Missouri 4.8%
Montana 5.0%
Nebraska 5.0%
Nevada No state income tax
New Hampshire No state income tax
New Jersey None
New Mexico 5.9%
New York 11.7%
North Carolina 4.6%
North Dakota 1.5%
Ohio 3.5%
Oklahoma 4.75%
Oregon 8.0%
Pennsylvania None
Rhode Island 5.99%
South Carolina None
South Dakota No state income tax
Tennessee No state income tax
Texas No state income tax
Utah None
Vermont 30% of federal withholding or 6% for nonqualified deferred compensation
Virginia 5.75%
Washington No state income tax
Washington, D.C. None
West Virginia Varies by wage
Under $10,000: 2.36%
$10,000 – $25,000: 3.15%
$25,000.01 – $40,000: 3.54%
$40,000.01 – $60,000: 4.72%
Over $60,000: 5.12%
Wisconsin Varies by wage
Under $12,760: 3.54%
$12,760 – $25,520: 4.65%
$25,520.01 – $280,950: 5.30%
Over $280,950: 7.65%
Wyoming No state income tax

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US Average Bonus Pay Statistics: 2024

Bonus Pay Statistics
46% of business owners provided Christmas bonuses in 2022.
40% of employees in the private sector receive some form of bonus.
Women's bonus values tend to be 68% lower than men's.
33% of all companies plan to offer year-end bonuses to their employees.
The private sector offers 2 times as many bonuses as the public sector.
Since bonuses are a form of supplemental income, they are taxed higher than regular income.
11% of employees receive end-of-year bonuses.
Holiday bonuses were given to 6% of employees, while 7% received cash profit sharing in 2020.
24% of employees received a Christmas bonus in 2022.
51% of business owners plan to award a Christmas bonus in 2023.
Referral bonuses are popular with 82% of employers.
45% of employees recruited through referrals stay with the company for more than 4 years.
On average, a referral bonus amounts to $2,500.
15% of companies offer non-monetary benefits for referrals.
3% of workers receive employee recognition bonuses.
1% of workers qualify for longevity bonuses.
Signing bonuses usually range from 5% to 25% of salary.
71% of small business owners offer cash bonuses.
Companies with less than 100 employees provide bonuses to 37% of employees.
Larger companies offer bonuses to 44% of their employees.
The Information industry offers end-of-year bonuses to 26% of its employees.
Only 2% of workers in the information industry receive holiday bonuses.
19% of employees in management, business, and financial occupations receive end-of-year bonuses.
Referral bonuses are offered to 24% of workers in the information industry.
10% of employees in management and finance receive referral bonuses.
13% of sales personnel receive cash profit-sharing bonuses.
11% of production workers receive cash profit-sharing bonuses.
ESG-driven bonuses are 10% to 15% higher than financial metric-based bonuses.
70% of Christmas bonuses are under $500.
Bonuses equal 1% to 5% of a worker's salary.
70% of small business owners agree that one week’s pay is a good holiday bonus.
62% of small businesses that don't give holiday bonuses believe they are not profitable enough.
23% of companies award bonuses based on their profits.
Cash bonuses for chief financial officers increased by 36% in 2021.
27% of employees expect a Christmas bonus in 2023.
84% of workers agree that Christmas bonuses improve morale.
65% of US employees prefer performance-based bonuses.
53% of workers prefer 12 monthly bonuses over one annual bonus.
51% of employees expect their bonuses to be larger than last year.
Bonuses rank 3rd among job satisfaction drivers, behind work-life balance and respectful treatment.

How to Use the Bonus Pay Tax Calculator

The Bonus Pay Tax Calculator is designed to help you quickly and accurately calculate the amount of tax you’ll owe on your bonus or supplemental income. Whether you’re receiving a one-time bonus, commission, or any other form of supplemental wage, this tool simplifies the process by accounting for both federal and state-specific tax rates.

Select Your State

  • Start by choosing the state where you live or work from the dropdown menu labeled “Select your state.”
  • Each state has different rules for taxing bonuses and supplemental income, so it’s important to pick the correct one. States like California and New York have specific tax rates for bonuses, while others like Florida and Texas don’t tax bonuses at all.
  • If you’re unsure about your state’s tax rate, don’t worry—the calculator automatically applies the correct rates based on your selection.

Enter Your Annual Gross Income (if required)

  • Some states calculate bonus taxes based on your annual income. These include states like Georgia, West Virginia, and Wisconsin. If you live in one of these states, a new field will appear asking you to input your Annual Gross Income.
  • Enter your total earnings before taxes for the year. The calculator will use this figure to determine the appropriate tax bracket and rate for your bonus.

Enter Your Bonus or Supplemental Pay

  • Next, enter the total amount of bonus or supplemental pay you’ve received in the field labeled “Enter your bonus or supplemental pay.”
  • This amount is crucial because it forms the basis for calculating how much tax you will owe.

Enter Federal Withholding Amount (for Vermont residents only)

  • If you are a resident of Vermont and select the option labeled “Vermont – 30% of federal withholding”, you’ll be asked to enter the amount of Federal Withholding instead of your bonus pay. This is because Vermont’s tax for certain types of supplemental income is based on a percentage of the federal tax withholding.
  • If you don’t live in Vermont, this section will remain hidden, and you can skip this step.

Calculate

  • Once you’ve entered all the required information, click the “Calculate” button to see the results.
  • The calculator will instantly display the following:
    • State: The state you selected.
    • Bonus Amount (or Federal Withholding for Vermont): The amount you entered.
    • Tax Rate: The applicable tax rate for your state.
    • Tax Amount: The total amount of tax you’ll owe on the bonus.

Example Calculation:

Imagine you live in California and receive a $10,000 bonus:

  • Select “California – 10.23% (Bonus & Stock Options)” from the state dropdown menu.
  • Enter “10000” in the bonus pay field.
  • Click “Calculate” to get an instant result showing that $1,023 (10.23%) will be deducted as state tax from your bonus.

Review Your Results

  • The result section will show a detailed breakdown of the calculation, including the applicable tax rate and the exact amount of tax deducted.
  • If you’re not satisfied with the result, you can modify your input or try selecting a different state to compare how different state tax rates affect your bonus.

Understanding Bonus Pay and Supplemental Income Taxes

Bonuses and other forms of supplemental income, such as commissions, severance pay, and stock options, are an important part of compensation packages for many employees. However, unlike your regular salary, these types of income are often taxed differently, leading to confusion about how much of your bonus you’ll actually take home. Understanding how taxes are applied to bonuses can help you avoid surprises and make more informed financial decisions.

What Is Supplemental Income?

Supplemental income refers to any type of compensation you receive outside of your regular salary or hourly wages. Common examples include:

  • Bonuses (performance, signing, holiday, or retention)
  • Commissions (sales-based earnings)
  • Stock options or equity grants
  • Severance pay
  • Retroactive pay increases
  • Overtime pay

 

Because this income is considered separate from your regular wages, it is often subject to different tax treatment, which may result in higher tax withholdings.

How Are Bonuses Taxed Federally?

At the federal level, the IRS categorizes bonuses as supplemental wages, and they are typically subject to a flat withholding rate. The current federal flat tax rate for bonuses and other supplemental income is 22%. This means that if you receive a bonus of $5,000, $1,100 will be withheld for federal taxes.

However, if your bonuses and supplemental wages exceed $1 million in a calendar year, the IRS mandates a higher withholding rate of 37% on any amount over $1 million.

Example:

  • If you receive a $5,000 bonus, the federal withholding would be $1,100 (22% of $5,000).
  • If your total bonuses exceed $1 million in a year, the first $1 million is taxed at 22%, and anything over that is taxed at 37%.

State Tax Treatment of Bonuses

In addition to federal taxes, your bonus may also be subject to state taxes, which vary significantly depending on where you live. Some states tax bonuses at the same rate as regular income, while others have special rules or flat tax rates for bonuses. Here are a few examples:

  • Flat-rate states: States like California apply a flat tax rate to bonuses. In California, bonuses are taxed at 10.23% if they fall under the category of stock options and bonuses, or 6.6% for other types of supplemental income.
  • No state tax states: States like Texas, Florida, and Nevada do not tax bonuses because they do not have state income taxes.
  • Variable-rate states: In states like Georgia and West Virginia, the tax rate depends on your annual gross income. For instance, in Georgia, income over $15,000 is taxed at 5.49%, while lower incomes face lower rates.

 

Because state tax rates vary widely, it’s crucial to know your state’s specific tax treatment of supplemental income to avoid any surprises when tax season arrives.

Federal Withholding Exceptions

In some cases, the flat 22% federal withholding may not apply. For example, if your employer combines your bonus with your regular wages and does not list it as a separate payment, your federal withholding could be based on your overall income tax bracket rather than the flat supplemental rate. This may result in a higher or lower withholding depending on your total earnings.

Additionally, some states, like Vermont, apply unique rules, such as taxing a percentage of your federal withholding instead of taxing the bonus directly. For Vermont residents, this means that your state tax is tied to how much is withheld federally, making it important to correctly input federal withholding amounts when using the calculator.

Why Bonuses Seem to Be Taxed Higher

Many employees are shocked when they see how much of their bonus is withheld for taxes, leading to the perception that bonuses are taxed at a higher rate than regular wages. However, bonuses are not inherently taxed more; they are simply withheld at a higher rate upfront. When you file your taxes at the end of the year, your total tax liability is calculated based on your total income, and any overpayment from bonus withholding may be refunded.

Example:

  • If too much is withheld from your bonus, you may receive a refund when you file your tax return.
  • Conversely, if too little is withheld, you might owe additional taxes when filing.
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Average Industry Bonus Percentage

Industry Average Bonus (% of Salary)
Finance 12.3%
Professional/Business Services 9.2%
Information 8.9%
Manufacturing 7.5%
Trade, Transport, and Utilities 6.6%
Leisure and Hospitality 5.1%
Construction 4.4%
Education and Health 4.0%
Other 3.9%

Data Retrieved From: BLS

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Year End Bonus Averages by Industry

Industry Average Bonus (% of Salary)
Finance 11.7%
Legal 5.0%
Consulting 4.9%
Real Estate 4.4%
Arts & Entertainment 4.3%
Communications 4.1%
Technology 4.0%
Accounting 3.5%
Construction 2.9%
Insurance 2.8%
Retail 2.5%
Manufacturing 2.5%
Automotive 1.9%
Education 1.7%
Transportation 1.5%
Facilities 1.5%
Healthcare & Social Assistance 1.1%
Food & Beverage 0.9%
Salon & Spa 0.7%

Data Retrieved From: Gusto

State-Specific Supplemental Tax Rates Explained

When it comes to taxing bonuses and supplemental income, states vary widely in how they handle these payments. Some states impose a flat tax rate, while others base the tax on income brackets or don’t tax bonuses at all. Understanding your state’s specific supplemental tax rate is key to ensuring accurate calculations and avoiding any surprises when receiving your bonus.

Below, we’ll break down the different approaches states take toward taxing bonuses, including flat-rate states, no-tax states, and variable-rate states.

Flat-Rate States

Flat-rate states impose a fixed percentage on bonuses and supplemental income, regardless of how much you earn. This makes it easier to predict how much will be withheld from your bonus, as the rate is consistent across all income levels.

Some key examples of flat-rate states include:

  • California: California applies a flat tax rate of 10.23% on bonuses and stock options. For other types of supplemental income, such as commissions or severance pay, the rate is 6.6%.

    Example: If you receive a $10,000 bonus in California, you’ll owe $1,023 in state taxes for bonuses and stock options or $660 for other supplemental pay.

  • New York: New York taxes bonuses at a flat rate of 11.7%, one of the highest state rates for supplemental income in the U.S.

    Example: A $10,000 bonus in New York would result in $1,170 in state tax being withheld.

  • Oregon: Oregon imposes an 8.0% flat rate on all supplemental income, including bonuses, severance pay, and commissions.

    Example: For a $5,000 bonus in Oregon, you’d owe $400 in state tax.

No-Tax States

Several states in the U.S. do not impose a state income tax at all, which means your bonus or supplemental income is only subject to federal withholding. If you live in one of these states, you won’t have to worry about state-level taxes on your bonus.

Key no-tax states include:

  • Florida
  • Texas
  • Nevada
  • Wyoming
  • Alaska
  • South Dakota
  • Washington
  • Tennessee (No income tax as of 2021)
  • New Hampshire (No state income tax, though they tax dividends and interest)

 

For residents of these states, the federal withholding rate of 22% will be the only tax deducted from your bonus.

Example: If you live in Texas and receive a $7,000 bonus, only federal tax will be withheld, amounting to $1,540 (22% of $7,000). You’ll keep the rest.

Variable-Rate States

In some states, the tax rate on bonuses and supplemental income varies based on your annual gross income. These states use income brackets to determine how much tax to withhold from your bonus, similar to how regular income taxes are calculated. The more you earn annually, the higher your bonus may be taxed.

Key examples include:

  • Georgia: In Georgia, your bonus is taxed based on income brackets, with the rate increasing as your total annual income rises. The rates range from 2% for income up to $8,000, to 5.49% for income over $15,000.

    Example: If you earn $20,000 annually and receive a $2,000 bonus, your bonus would be taxed at 5.49%, resulting in a $109.80 state tax withholding.

  • Wisconsin: Wisconsin applies varying tax rates to bonuses based on your annual income. Rates start at 3.54% for income up to $12,760 and increase to 7.65% for income over $280,950.

    Example: If you earn $50,000 annually and receive a $5,000 bonus, your bonus would be taxed at 5.30%, resulting in a $265 state tax withholding.

  • West Virginia: West Virginia uses income brackets to determine bonus tax rates, ranging from 2.36% for income up to $10,000 to 5.12% for income over $60,000.

    Example: If you earn $70,000 annually and receive a $3,000 bonus, your bonus would be taxed at 5.12%, resulting in a $153.60 state tax withholding.

Unique State Rules

Some states have unique rules for taxing bonuses, often tying their supplemental income taxes to federal withholding or specific local tax rates.

  • Vermont: Vermont has two different tax rates for bonuses. For general bonuses, a flat rate of 6% applies. However, for deferred compensation or specific types of income, Vermont uses 30% of federal withholding as the basis for the state tax.

    Example: If your federal withholding is $1,000 for a bonus, Vermont would tax you $300 (30% of $1,000) for deferred compensation. For regular bonuses, if you received $2,000, Vermont would tax you $120 (6% of $2,000).

  • Maryland: Maryland taxes bonuses based on both state and local tax rates, with a general state rate of 3.2%. If you live in certain areas of Maryland, local tax rates can also apply, increasing the amount of tax you’ll owe.

    Example: A $4,000 bonus in Maryland would result in $128 state tax (3.2%), plus any additional local taxes.

  • Delaware: For deferred compensation, Delaware recommends using a 5.0% state tax rate. However, other types of bonuses and supplemental income might follow different rates.

    Example: A $3,000 deferred compensation in Delaware would be taxed $150 (5%).

States with No Special Supplemental Tax Rates

Several states do not have specific tax rates for bonuses and instead treat them as regular income. In these states, your bonus will be taxed at the same rate as your salary or hourly wages.

Key examples include:

  • Illinois
  • Indiana
  • Connecticut
  • North Carolina

 

In these states, you’ll owe taxes on your bonus based on your standard income tax bracket, with no special rates applied to bonuses or other supplemental pay.

Example: If you live in North Carolina, your bonus would be taxed at the standard rate of 4.6%, regardless of whether it’s a bonus or regular income.

Federal Withholding and Bonus Pay Taxes

When it comes to federal taxes, bonuses and other forms of supplemental income are treated differently than your regular paycheck. Understanding how federal withholding applies to bonuses is essential for managing your earnings and ensuring that you’re not caught off guard when tax season rolls around. The federal government imposes specific rules for taxing bonuses, which can vary depending on the size of the bonus and how it’s paid out. Let’s break down these rules to clarify how much of your bonus will be withheld for federal taxes.

Flat Federal Withholding Rate for Bonuses

For most employees, the IRS treats bonuses as supplemental wages, meaning they are taxed at a different rate than your regular salary. The current federal withholding rate for bonuses and supplemental income is a flat 22%. This rate applies to all bonuses that are $1 million or less in a calendar year.

Here’s how it works:

  • When you receive a bonus, your employer is required to withhold 22% of that amount for federal taxes.
  • This withholding is automatic, meaning that when you receive your bonus, you will only get 78% of the total amount after federal tax deductions.

 

Example: If you receive a $5,000 bonus, your employer will withhold $1,100 (22% of $5,000) for federal taxes. You’ll take home $3,900 after the federal withholding is applied.

Federal Withholding for Bonuses Over $1 Million

If you are fortunate enough to receive more than $1 million in bonuses during a calendar year, the IRS imposes a higher withholding rate on the portion of your bonus that exceeds $1 million.

Here’s how it works:

Example: If you receive a $2 million bonus, here’s how the federal withholding would be applied:

  • The first $1 million is taxed at 22%, meaning $220,000 is withheld.
  • The remaining $1 million is taxed at 37%, meaning $370,000 is withheld.
  • In total, $590,000 would be withheld in federal taxes, and you would take home $1,410,000.

The Aggregate Method vs. Percentage Method

Employers can choose between two different methods for calculating federal withholding on bonuses: the aggregate method and the percentage method. Each method can result in different withholding amounts, depending on how the bonus is paid.

The Percentage Method

This is the most common method and applies the flat 22% withholding rate to the bonus itself. This method is straightforward and generally results in less withholding compared to the aggregate method.

  • Example: If your bonus is $5,000, you’ll be taxed 22%, meaning $1,100 is withheld, regardless of your regular pay.
The Aggregate Method

In this method, your employer adds your bonus to your regular wages to determine your total income for the current pay period. Your federal withholding is then based on your overall income tax bracket rather than the flat 22% rate. This can sometimes result in higher withholding if the combined income pushes you into a higher tax bracket.

  • Example: Let’s say you earn $60,000 annually, and you receive a $10,000 bonus. Your employer adds the bonus to your regular paycheck for that pay period and withholds taxes based on the total amount. If this combined amount places you in a higher tax bracket, your withholding rate could be more than 22%, reducing your take-home bonus.

What About Social Security and Medicare Taxes?

In addition to federal income taxes, bonuses are subject to Social Security and Medicare taxes, just like your regular wages.

  • Social Security Tax: The current rate is 6.2% for both the employee and the employer, applied to wages up to the annual wage base limit (which is $160,200 for 2024). If your bonus, combined with your regular income, exceeds this wage base, no Social Security tax will be applied to any amount beyond the limit.

    Example: If your regular salary is $150,000, and you receive a $20,000 bonus, only $10,200 of your bonus will be subject to Social Security tax, as the wage base limit is $160,200. The remaining $9,800 will not be taxed for Social Security purposes.

  • Medicare Tax: The Medicare tax rate is 1.45% on all wages, with no wage base limit. If your total earnings exceed $200,000, an additional 0.9% Medicare surtax is applied to the amount above $200,000.

    Example: If your total wages (including bonuses) are $250,000, the first $200,000 will be subject to the regular 1.45% Medicare tax, and the remaining $50,000 will be taxed at a rate of 2.35% (1.45% + 0.9%).

Will I Get a Refund for Over-Withholding?

Federal withholding on bonuses is designed to ensure that you pay the correct amount of taxes throughout the year, but it may not always be perfect. If your employer withholds more than necessary, you’ll have the opportunity to recoup the overpaid taxes when you file your annual tax return.

During tax season, your total income will be calculated, and if too much was withheld from your bonus, you will receive a refund from the IRS. Conversely, if not enough was withheld, you may owe additional taxes when you file.

Strategies to Reduce Bonus Tax Withholding

While you can’t avoid paying federal taxes on your bonus, there are some strategies you can use to potentially reduce the amount withheld upfront:

  • Contribute to a 401(k): Bonuses are considered regular income for 401(k) contributions, so you can direct a portion of your bonus into your retirement account, which may reduce your taxable income.

    Example: If you contribute $2,000 of your $10,000 bonus to your 401(k), you’ll only be taxed on the remaining $8,000.

  • Check Your Withholding Allowances: If you expect to receive a significant bonus and want to reduce the withholding, consider adjusting your W-4 form to claim additional allowances. However, this should be done cautiously to avoid under-withholding and owing taxes at the end of the year.

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Frequently Asked Questions About Bonus Pay Taxes

Understanding how bonuses are taxed can be confusing due to varying rules at both the federal and state levels. Below, we answer some of the most common questions about bonus pay taxes to help you get a clearer picture of how much tax will be withheld from your bonus and what you can expect when it comes time to file your taxes.

What is bonus pay tax?

Bonus pay tax refers to the taxes applied to bonuses or other forms of supplemental income, such as commissions, severance pay, and stock options. Bonuses are taxed as supplemental wages, which are subject to both federal and state income taxes. At the federal level, the IRS withholds a flat 22% from most bonuses, and additional taxes may be applied at the state level, depending on where you live.

Are bonuses taxed at a higher rate than regular wages?

Bonuses aren’t taxed at a higher rate, but they may appear to be because of the way taxes are withheld. For most employees, the IRS requires a flat 22% withholding on bonus pay, which may seem high compared to regular paycheck deductions. This flat rate is designed to cover federal taxes upfront, but when you file your tax return, your actual tax liability will be calculated based on your total income, potentially resulting in a refund if too much was withheld.

How do I know if my bonus will be taxed at 22%?

The federal government generally applies a 22% flat withholding rate to any bonus that is $1 million or less during the calendar year. If your bonus exceeds $1 million, the portion above $1 million is taxed at a higher rate of 37%. Your employer will automatically apply the 22% withholding rate unless they use the aggregate method, which can result in different withholding amounts.

How are bonuses taxed at the state level?

State tax treatment of bonuses varies widely. Some states, such as California and New York, apply specific tax rates to bonuses. Other states, like Texas and Florida, do not tax bonuses because they don’t have a state income tax. In states with income brackets, like Georgia and West Virginia, the tax rate may depend on your annual income.

Here are a few common approaches states take:

  • Flat-rate states: Apply a fixed percentage to bonuses (e.g., California taxes bonuses at 10.23% for stock options and bonuses, and 6.6% for other types of supplemental income).
  • No-tax states: Don’t impose a state income tax on bonuses (e.g., Florida, Texas, Nevada).
  • Variable-rate states: Tax bonuses based on your annual income (e.g., Wisconsin, Georgia).

What happens if too much is withheld from my bonus?

If too much is withheld from your bonus, don’t worry—you may receive a refund when you file your taxes. The IRS and your state tax agency will calculate your total tax liability for the year based on your entire income, including regular wages and bonuses. If the amount withheld was higher than necessary, you’ll get the excess back as part of your tax refund.

Example: If your employer withheld 22% from your bonus, but your total income for the year puts you in a lower tax bracket, you may be entitled to a refund when you file your tax return.

Can I avoid paying taxes on my bonus?

It’s not possible to avoid paying taxes on your bonus entirely, but there are strategies you can use to reduce the tax impact:

  • Contributing to a 401(k): You can reduce the taxable portion of your bonus by contributing some of it to a pre-tax 401(k) retirement account. Contributions to a 401(k) reduce your taxable income, which means you’ll pay less tax on the portion of your bonus that is not contributed.
  • Check your withholding allowances: Adjusting your W-4 form to claim more allowances can lower the amount withheld from your bonus, though this may affect your tax liability at the end of the year.

Why does my bonus look smaller than expected?

Many employees are surprised when their bonus is significantly smaller than expected, and this is often due to the flat 22% federal withholding and any applicable state tax. Additionally, bonuses are subject to Social Security and Medicare taxes, which further reduce the amount you take home.

Example: If you receive a $5,000 bonus, after the 22% federal withholding, you’ll take home $3,900. If your state also taxes bonuses, you may lose even more to taxes.

What if I live in a state with no income tax?

If you live in a state with no income tax, such as Florida, Texas, or Nevada, your bonus will only be subject to federal taxes (22%) and Social Security and Medicare taxes. This can make a substantial difference in how much of your bonus you take home compared to someone living in a state with high income taxes, like California or New York.

Example: In Florida, you’d only pay the 22% federal tax on your bonus. If you received a $10,000 bonus, you’d take home $7,800 after federal withholding (assuming no other deductions).

What is the federal withholding for bonuses over $1 million?

If your total bonuses in a calendar year exceed $1 million, the IRS requires your employer to withhold taxes at a higher rate for the portion over $1 million. The first $1 million is taxed at the standard 22%, and the portion over $1 million is taxed at 37%.

Example: If you receive a $2 million bonus, the first $1 million will be taxed at 22%, and the second $1 million will be taxed at 37%. This means $220,000 will be withheld from the first million and $370,000 from the second million, for a total withholding of $590,000.

What are Social Security and Medicare taxes on bonuses?

In addition to federal and state income taxes, bonuses are also subject to Social Security and Medicare taxes. These are calculated at the same rates as your regular wages:

  • Social Security Tax: 6.2% on wages up to the annual wage base limit (which is $160,200 for 2024). Any income over this limit is not subject to Social Security tax.
  • Medicare Tax: 1.45% on all wages, with no wage limit. An additional 0.9% Medicare surtax applies to wages over $200,000.

 

Example: If you receive a $10,000 bonus, $620 (6.2%) will be withheld for Social Security (assuming your total income is below the wage base limit), and $145 (1.45%) will be withheld for Medicare.

Disclaimer: The content provided on this webpage is for informational purposes only and is not intended to be a substitute for professional advice. While we strive to ensure the accuracy and timeliness of the information presented here, the details may change over time or vary in different jurisdictions. Therefore, we do not guarantee the completeness, reliability, or absolute accuracy of this information. The information on this page should not be used as a basis for making legal, financial, or any other key decisions. We strongly advise consulting with a qualified professional or expert in the relevant field for specific advice, guidance, or services. By using this webpage, you acknowledge that the information is offered “as is” and that we are not liable for any errors, omissions, or inaccuracies in the content, nor for any actions taken based on the information provided. We shall not be held liable for any direct, indirect, incidental, consequential, or punitive damages arising out of your access to, use of, or reliance on any content on this page.

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