Why Does My Bonus Get Taxed So Much?

You get a $5,000 bonus and barely $3,300 lands in your account, so it feels like it was taxed nearly 40%. Here's the single most important fact about bonus taxation: your bonus is not taxed at a higher rate than your salary — it's withheld differently. The IRS classifies bonuses as "supplemental wages," and employers typically withhold federal income tax at a flat 22% rate rather than using your normal payroll calculation. That flat 22%, plus Social Security and Medicare, is why the take-home looks small. But it's withholding, and the real tax is settled when you file.

How Bonus Withholding Is Calculated (2026)

Most employers use the percentage method: a flat 22% federal withholding on bonuses up to $1 million, and a mandatory 37% on any portion above $1 million. On top of that come the standard payroll taxes — Social Security at 6.2% (only until your year-to-date wages hit the $176,100 cap) and Medicare at 1.45%, plus a 0.9% Medicare surtax once combined wages pass $200,000. These figures are the IRS 2026 rates, confirmed in the IRS Publication 15 supplemental wage rules.

Withholding Is Not Your Real Tax Rate

This is the part that saves people from panic. The 22% is a withholding rate — an estimate the employer sends to the IRS on your behalf. Your actual tax on the bonus is determined when you file your return, based on your total income and marginal bracket. If your marginal rate is 12%, the extra withheld comes back as part of your refund. If it's 24% or higher, you might owe a little more. Either way, the bonus is ultimately taxed as ordinary income at your normal rate — there is no special "bonus tax."

How to Use This Calculator

Enter your bonus amount, and optionally your year-to-date wages (which determines whether Social Security still applies) and your state supplemental rate. The calculator estimates federal withholding, Social Security, Medicare (including the high-earner surtax), and any state tax, then shows your take-home bonus and effective withholding rate. It uses the flat percentage method because that's how the large majority of employers actually withhold bonuses.

Worked Example

You earn $80,000 year-to-date and receive a $10,000 bonus, in a state with no supplemental tax. Federal withholding is 22% = $2,200. Social Security applies (you're under the $176,100 cap) at 6.2% = $620. Medicare is 1.45% = $145. Total withheld is $2,965, so you take home $7,035 — an effective rate of 29.7%, not the 40% it might feel like. And if your marginal federal bracket is only 22% or less, much of that lines up with your real tax; anything over-withheld returns at filing.

How to Keep More of Your Bonus

• Defer into your 401(k): directing the bonus to your retirement account reduces the taxable amount now — often the single most effective move
• Contribute to an HSA if you have a high-deductible health plan — triple tax-advantaged and reduces taxable income
• Ask about the aggregate method: if your normal rate is below 22%, this alternative withholding method may withhold less up front
• Adjust your W-4 if bonuses regularly leave you over-withheld and waiting on large refunds
• Time deductible expenses — charitable gifts or other deductions in the same year can offset the bonus income

See Your Whole Pay Picture

For your regular salary after all taxes, use the take-home pay calculator, which covers multiple countries and full income-tax brackets. Bonus is commission-like supplemental pay, so if you earn variable income, the commission calculator and overtime calculator help you model the rest of it. Putting the bonus toward a goal? The savings goal calculator shows the impact.

Frequently Asked Questions