Getting a bonus feels great — right up until the deposit lands and you realize a big chunk is gone. If a $10,000 bonus turned into $6,012 in your bank account, you didn't get scammed — you got the standard 2026 IRS supplemental wage treatment. This guide walks through exactly how bonuses are taxed, why the numbers look the way they do, and how to plan for the payout before payday.
Skip the math — see your bonus after tax now
Enter your bonus and state — get the net figure in seconds.
Open Bonus Tax Calculator →What Counts as a Bonus for Tax Purposes
The IRS treats bonuses as supplemental wages, a category that also includes commissions, overtime, back pay, severance, awards, prizes, and taxable fringe benefits. The rules that govern how these payments are withheld sit in Treasury Regulation 31.3402(g)-1 and IRS Publication 15 (Circular E). The important consequence: your employer withholds tax on bonuses using a different mechanism than on your regular paycheck, even though the money ultimately lands in the same annual tax return.
There are only two methods available to employers, and both are covered in this guide: the percentage method and the aggregate method. Most bonus checks — signing bonuses, performance bonuses, year-end bonuses — use the percentage method because it's simpler for payroll to run.
The Percentage Method: A Flat 22% Federal
When your employer issues a bonus on its own check (separate from regular wages), they usually use the percentage method. The rule is straightforward: withhold a flat 22% for federal income tax on the first $1,000,000 of supplemental wages in the year, and 37% on any amount above that. That's it — no brackets, no filing status adjustments, no W-4 lookups on the federal portion.
On top of the 22%, the bonus is subject to the standard FICA taxes: Social Security at 6.2% (up to the 2026 wage base of $184,500 in combined annual wages) and Medicare at 1.45% with no cap. High earners also pay an additional 0.9% Medicare on wages above $200,000 (single) or $250,000 (married filing jointly).
Percentage Method Formula (2026)
The math is simple enough to do on paper:
Net bonus = Gross bonus − Fed 22% − State supplemental − SS 6.2% − Medicare 1.45%
Substitute 37% for the federal rate on portions above $1M of yearly supplemental wages. Add 0.9% Medicare on portions of total annual wages above the additional-Medicare threshold.
The Aggregate Method: Marginal Rate Instead
When a bonus is paid in the same check as your regular wages, or when your employer chooses this route, the aggregate method applies. The payroll system calculates withholding on the combined amount as though it were a normal paycheck, then subtracts what would have been withheld on the regular portion alone. The difference is the bonus withholding.
In practice this means the bonus is withheld at your marginal bracket — 10%, 12%, 22%, 24%, 32%, 35%, or 37% depending on income — plus FICA and state. For low earners, the aggregate method usually withholds less than 22%. For high earners in the 32%+ bracket, it withholds more. Employers rarely volunteer to switch to aggregate; if you'd prefer that treatment, ask HR before the bonus is processed.
State Bonus Tax: Where You Work Matters Most
Federal withholding is uniform across the country. State treatment varies enormously, and it's usually the biggest single factor in how much of your bonus survives.
Most states publish a flat supplemental wage rate in their withholding guidance, mirroring the federal 22% concept. A handful of well-known 2026 rates:
| State | Supplemental Rate | $10,000 Bonus — Net |
|---|---|---|
| Texas, Florida, Nevada (+6 more) | 0% (no income tax) | $7,035 |
| Pennsylvania | 3.07% flat | $6,728 |
| Georgia | 5.39% | $6,496 |
| Illinois | 4.95% flat | $6,540 |
| Oregon | 8% | $6,235 |
| California | 10.23% | $6,012 |
| New York | 11.5% | $5,885 |
A handful of states — Connecticut, Kansas, Maryland, Louisiana, Massachusetts, Montana, and New Jersey among them — do not publish a flat bonus rate. In those states, your employer uses the aggregate method, and the withholding depends on your marginal bracket. Our bonus tax calculator picks the correct approach automatically for the state you select.
Three Real Bonus Examples
The following examples all use the percentage method with a $75,000 base salary and single filing status, so the only variable is the bonus amount and the state.
$1,000 Signing Bonus (Texas)
Federal 22% ($220), Social Security 6.2% ($62), Medicare 1.45% ($14.50), no state tax. Total withholding: $296.50. Net bonus: $703.50.
$5,000 Performance Bonus (California)
Federal 22% ($1,100), California supplemental 10.23% ($511.50), Social Security ($310), Medicare ($72.50). Total withholding: $1,994. Net bonus: $3,006. Roughly 40% of the bonus goes to withholding, but if the employee's actual marginal state rate is 9.3%, they'll recover about $47 of that state overwithholding at tax time.
$25,000 Year-End Bonus (New York)
Federal 22% ($5,500), New York supplemental 11.5% ($2,875), Social Security ($1,550), Medicare ($362.50). Total withholding: $10,287.50. Net bonus: $14,712.50. A high earner already past the $200,000 Additional Medicare threshold would see an extra $225 of 0.9% Medicare on the bonus.
How to Reduce the Tax on Your Bonus (Legally)
You can't renegotiate the 22% federal supplemental rate, but you can shrink the taxable bonus. The tactics below all work with your existing payroll system:
- Increase your 401(k) contribution rate before the bonus posts. A traditional 401(k) deferral comes out pre-tax on both regular and supplemental wages. Directing 10–15% of the bonus into your 401(k) cuts your federal withholding on that portion to zero.
- Max your HSA (if you're on a high-deductible plan). The 2026 HSA limits are $4,400 (individual) and $8,750 (family). HSAs offer the same pre-tax treatment as 401(k)s and never expire.
- Front-load an FSA. If your employer permits a bonus-based FSA election, dependent-care FSAs allow up to $5,000 and healthcare FSAs $3,300 (2026) — both come out pre-tax.
- Ask about deferred compensation. Some employers offer nonqualified deferred comp plans that let you push part of the bonus to a later tax year, useful if you expect to be in a lower bracket later.
If your bonus is unusually large, consider timing charitable contributions or estimated tax payments to smooth the tax impact. A quick conversation with a CPA before payday often pays for itself.
Withholding vs. Actual Tax: The Refund Story
This is the point most bonus articles skip. The 22% federal withholding is not the tax you actually owe on the bonus — it's a deposit toward your annual liability. When you file your return, your bonus is combined with your other wages, taxed at whatever bracket applies, and the total withholding is credited against the total tax.
If your marginal federal bracket is 12%, the 22% withheld on a $10,000 bonus overshoots by roughly $1,000 — which comes back as a refund. If your marginal bracket is 24%, you'll owe about $200 more at tax time. If you're in the 32%–37% brackets on a large bonus, the deficit can be substantial and should be covered by an estimated tax payment to avoid an underpayment penalty. Use the 2026 federal tax brackets to check where your combined income lands.
Frequently Asked Questions
How much tax will be taken out of my bonus in 2026?
Federal withholding on a bonus under the IRS percentage method is a flat 22% (37% on any portion above $1 million in a calendar year). Add Social Security (6.2% up to the $184,500 wage base), Medicare (1.45%), and — depending on where you work — a state supplemental rate ranging from 0% (Texas, Florida, Nevada, and six others) to 11.5% (New York). Total withholding on a typical bonus lands between 25% and 40%.
Is a bonus taxed twice or at a higher rate?
No. A bonus is only withheld at a different rate — it isn't taxed twice, and it isn't legally taxed at a higher rate than your regular wages. Your actual tax liability is settled on your annual return using the same brackets that apply to everything else you earned. If your marginal bracket is 12% and the employer withheld at 22%, you'll get the difference back as a refund.
What is the difference between the percentage method and the aggregate method?
Under the percentage method, the bonus is paid as a separate check and withheld at a flat 22% federal rate. Under the aggregate method, the bonus is combined with your regular paycheck and withheld at your marginal bracket based on that combined amount. Employers choose the method — the percentage method dominates because it's simpler and produces predictable withholding for both parties.
Which states have no bonus tax?
Nine states impose no state income tax at all, so a bonus in these states faces only federal and FICA withholding: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. On a $10,000 bonus, that difference is worth $500 to $1,200+ compared to states like California or New York.
Can I reduce the tax on my bonus?
You can't change the federal supplemental rate, but you can shrink the taxable amount by directing part of the bonus into pre-tax accounts. Increasing your 401(k), HSA, or dependent-care FSA contribution before the bonus is paid reduces both federal income tax and — for 401(k)/HSA — the amount that reaches your paycheck at all. Ask HR whether they can apply an existing deferral election to the bonus.
How is a $5,000 bonus taxed?
A $5,000 bonus under the percentage method has $1,100 federal, $310 Social Security, and $72.50 Medicare withheld ($1,482.50 total, or 29.6%). Net bonus is $3,517.50 in a no-tax state. In California (10.23% supplemental), state tax adds $511.50, bringing net to $3,006. In New York (11.5% supplemental), net is $2,942.50.
Run the numbers on your own bonus
Get an instant, state-accurate net bonus figure — free, no signup.
Related Reading
How Much Tax Is Taken From Your Paycheck?
Exact tax percentages at every income level.
How to Increase Your Take-Home Pay
7 proven ways to keep more of every paycheck.
📚 The Complete Paycheck Guide
Everything about paycheck calculations in 2026.
2026 Federal Tax Brackets
Official 2026 IRS brackets for all filing statuses.
Last updated: July 2026. Federal rates reflect IRS Publication 15 (2026) and Revenue Procedure 2025-32. State supplemental rates from state Department of Revenue guidance, current as of publication.