Bonus Tax Calculator
Wondering why employee bonuses get taxed so heavily? Calculate exact federal supplemental withholding (22% flat rate vs. aggregate method), FICA taxes, state withholding, and your actual net take-home bonus cash.
Bonus Details & Tax Settings
Why are bonuses taxed higher than regular pay?
The IRS classifies bonuses as supplemental wages. Because bonuses are paid on top of ordinary salaries, employers are required by IRS Circular E (Publication 15-T) to withhold federal income taxes at a flat 22% statutory withholding rate (or 37% for bonuses over $1,000,000).
Important Distinction: Withholding is not your final tax bill. If 22% exceeds your actual effective tax bracket at tax time, the excess is refunded back to you on your Form 1040.
Top States Supplemental Tax Rates (2026)
Flat Percentage Method vs. Aggregate Method: Which Is Better?
The Percentage Method (22% Flat)
Used by the vast majority of enterprise employers when issuing separate bonus checks. The IRS mandates a flat 22% federal tax withholding on supplemental pay up to $1 million ($37% on amounts exceeding $1M).
The Aggregate Method
When a bonus is bundled together directly onto your regular biweekly paycheck, payroll software calculates federal withholding on the sum as if you earn that elevated rate all 26 pay periods.
Frequently Asked Questions
Will I get refunded if too much was withheld from my bonus?
Yes. Withholding is simply an advance estimated payment toward your annual tax liability. When you file your annual federal Form 1040, your total wages (regular pay + bonus) are taxed according to standard marginal tax brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%). If the 22% flat rate exceeded your actual effective tax rate, the difference is refunded in full.
Can I contribute my entire bonus to my 401(k) to avoid taxes?
Yes, if your employer's plan allows bonus deferrals and you haven't yet reached the IRS annual contribution limit ($23,000 for 2026, or $30,500 if age 50 or older). Deferring into a traditional 401(k) reduces both federal and state income tax withholding dollar-for-dollar, although FICA payroll taxes (7.65%) still apply.
What happens if my bonus exceeds $1,000,000?
Under IRS supplemental wage rules, supplemental pay exceeding $1,000,000 in a calendar year must be withheld at the maximum statutory individual tax rate of 37% on the portion exceeding $1M, with no exceptions for employee Form W-4 elections.
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