Updated June 15, 2026 · 5 min read
A bonus is taxed as supplemental wages, and most employers withhold federal income tax at a flat 22% rate (rising to 37% on amounts over $1 million in a year). On top of that come Social Security (6.2%), Medicare (1.45%), and any state income tax — so a $5,000 bonus can arrive as roughly $3,300. Crucially, that withholding is not your final tax bill: bonuses are ordinary income, so the real amount you owe is settled when you file.
No — and this is the single biggest misconception. Bonuses are ordinary income, taxed at the same rates as your salary once you file your return. What's different is withholding: the IRS lets employers withhold tax from supplemental wages using a simpler flat-rate method instead of running your bonus through the regular wage tables.
Because that flat rate is often higher (or lower) than your actual marginal rate, your bonus paycheck can look over-taxed. The difference comes back to you as a refund — or gets trued up if you owe — at tax time.
The IRS allows two methods for withholding federal income tax on supplemental wages like bonuses, commissions, and severance:
The 22% only covers federal income tax. A bonus is also subject to the same payroll and state taxes as any wages:
| Item | Rate | Amount |
|---|---|---|
| Federal income tax | 22% | $1,100 |
| Social Security | 6.2% | $310 |
| Medicare | 1.45% | $72.50 |
| Take-home | — | ≈ $3,517 |
In a state with a 5% income tax, knock another $250 off, landing near $3,267. Remember: if your true marginal rate is only 12%, much of that 22% federal withholding comes back at tax time.
It wasn't taxed at 40% — it was withheld at a higher rate than you'll ultimately owe. Many employers use the aggregate method, which lumps the bonus with regular pay and can withhold heavily. The flat method withholds 22% federal plus 7.65% FICA and any state tax. Either way, your actual tax is settled when you file, and over-withholding comes back as a refund.
For federal income tax withholding, bonuses (supplemental wages) use a flat 22% rate up to $1 million per year, and 37% on any amount above $1 million. This is withholding, not your final tax — bonuses are ultimately taxed as ordinary income at your regular rates.
You can't avoid tax entirely, but you can defer it. Routing a bonus into a pre-tax 401(k) or HSA reduces your taxable income for the year. Some employers allow you to set a separate 401(k) deferral percentage for bonuses specifically.
Only in how it's withheld. The IRS allows a flat 22% withholding on bonuses for convenience, but a bonus is ordinary income — taxed at the same brackets as your salary when you file your return.