Bonus Tax Calculator (Supplemental Wages)

How Bonus Tax Works in 2026

The IRS classifies bonuses, commissions, overtime, and severance as "supplemental wages." Employers can withhold federal tax two ways. The flat percentage method applies a flat 22% to your bonus when it is paid on a separate check — this is what most employers use because it is simple. Bonuses over $1 million are withheld at 37% on the amount above $1M. The aggregate method adds the bonus to your most recent regular paycheck, calculates withholding on the combined amount using IRS tables, then subtracts what was already withheld. Your actual tax owed at filing depends on your total annual income, not the withholding method — if too much was withheld you get a refund, if too little you owe.

Flat 22% vs Aggregate Method

The flat 22% method is often better for higher earners already in the 24%, 32%, or 35% bracket because withholding is capped at 22%. The aggregate method is usually better for low-to-mid earners in the 10% or 12% bracket because it withholds at their lower marginal rate. For someone earning $50,000 with a $5,000 bonus, aggregate method withholds roughly $600 in federal tax while flat method withholds $1,100 — a $500 paycheck difference, though both result in the same tax owed at year-end. This calculator shows both methods side-by-side so you can verify your employer chose the better option or plan for a refund.

FICA, State Tax, and Pre-Tax Bonus Deductions

Regardless of withholding method, bonuses are always subject to Social Security (6.2% up to $176,100 wage base for 2025/2026) and Medicare (1.45% on all wages, plus 0.9% Additional Medicare Tax above $200,000). State income tax also applies based on your state's rate — nine states charge 0% while California's top rate reaches 13.3%. You can reduce bonus tax by routing some of it pre-tax: 401(k) contributions lower federal and state tax (but not FICA), and HSA contributions lower federal, state, AND FICA — making HSA the most tax-efficient place to send bonus money if you have a high-deductible health plan.

Bonus Planning Tips

If your bonus pushes your annual income into a higher marginal bracket, only the portion above the bracket threshold is taxed at the higher rate — your whole income does not suddenly cost more. Consider timing: a December bonus deferred into January can smooth income across tax years. Max out 401(k) or HSA contributions from the bonus if you are not already at the limit — the tax savings are immediate. Last updated: April 2026.