Bonuses are considered "supplemental wages" by the IRS — separate from regular salary. Employers can use one of two withholding methods, which can significantly affect how much tax is withheld from your bonus check.
The Two IRS Bonus Withholding Methods
Method 1: Flat Supplemental Rate (22%)
For bonuses under $1 million, employers can withhold a flat 22% for federal income tax — regardless of your normal salary or tax bracket. This is the most common method because it's simple.
FICA still applies: 6.2% Social Security (up to the $176,100 annual wage base) + 1.45% Medicare. State income tax also applies at your state's supplemental rate or regular rate.
Method 2: Aggregate Method
The employer adds the bonus to your most recent regular paycheck, calculates the total withholding on the combined amount, then subtracts what was already withheld from the regular paycheck. The difference is withheld from the bonus.
This method can result in more or less withholding depending on your income bracket and pay frequency. It tends to over-withhold for high earners because a large bonus pushes your annualized income into a higher bracket temporarily.
Real Bonus Tax Examples (2026)
| Scenario | Bonus | Flat Method (22%) | FICA | Net (approx) |
|---|---|---|---|---|
| $5,000 bonus | $5,000 | $1,100 | $383 | ~$3,518 |
| $10,000 bonus | $10,000 | $2,200 | $765 | ~$7,035 |
| $25,000 bonus | $25,000 | $5,500 | $1,913 | ~$17,588 |
| $50,000 bonus | $50,000 | $11,000 | $3,825 | ~$35,175 |
Net is approximate — does not include state income tax or additional Medicare (0.9% on wages over $200k). Use bonus tax calculator for exact amounts.
Bonuses Over $1 Million
Bonuses and supplemental wages exceeding $1 million in a calendar year are subject to mandatory withholding at the top marginal rate: 37% on the amount over $1 million, with the flat 22% rate applying below that threshold.
How to Reduce Tax on a Bonus
- Increase 401k contributions — If your bonus is paid separately, ask HR to withhold more of it to your 401k (up to the $23,500 limit). Pre-tax 401k contributions reduce the taxable portion.
- Time it strategically — If you expect lower income next year, you might negotiate to receive the bonus in January instead of December.
- Don't worry about withholding method — Your final tax is based on your total annual income, not withholding. Over-withheld amounts come back as a refund; under-withheld creates a balance due. The withholding method only affects cash flow, not the ultimate tax owed.
Do Bonuses Affect Social Security Taxes?
Yes — bonuses are subject to Social Security tax (6.2%) unless you've already exceeded the $176,100 wage base for the year. Once your total wages (salary + bonus) exceed $176,100, no additional Social Security is withheld.