what are bonuses taxed at
Bonuses are typically taxed as supplemental income, with employers withholding federal taxes at a flat 22% rate for amounts under $1 million in the US. This applies alongside Social Security (6.2%) and Medicare (1.45%) taxes, often making the initial paycheck feel heavily hit.
Withholding Methods
Employers use two IRS-approved approaches for handling bonus taxes, which can lead to surprises on your paystub.
- Percentage Method : Bonus is treated separately; 22% federal withholding on bonuses up to $1 million, jumping to 37% on excess. This is common for standalone bonus checks.
- Aggregate Method : Bonus combines with regular pay, taxed at your standard bracket rate—potentially lower or higher based on total income.
State taxes vary widely , from 0% in states like Florida to over 10% in California, plus local rules in some cities.
Why It Feels Like More
Picture getting a $5,000 bonus: Uncle Sam snags ~$1,100 federal (22%), ~$310 Social Security, ~$72 Medicare—totaling around 37% before state bites. But here's the twist: This is just withholding—you settle up at tax time. Many get refunds if their actual bracket is lower (e.g., 12-24%), as the flat rate over-withholds for higher earners.
"Why did my bonus get taxed at 44%?" A Redditor vented, mirroring forum gripes where combined withholdings shock folks unused to the flat rate.
2026 Tax Context
As of early 2026, these rates hold steady from 2025—no major shifts post- reelection, though proposals float around deferrals. Canada differs: Bonuses there integrate into regular income, often hitting 30-50% marginal rates without a flat option.
Bonus Amount| Federal Withholding (Percentage Method)| Total Typical
US Withholding (Est.)
---|---|---
$1,000| 22% ($220)| ~37% ($370) 5
$5,000| 22% ($1,100)| ~37% ($1,850) 4
$1.5M| 22% on $1M + 37% on $500K| Higher + state 3
Tips to Lessen the Sting
- Ask HR for aggregate method if your bracket's low.
- Max retirement contributions (401(k)) pre-bonus.
- Defer via RSUs if offered—spreads tax hit.
Bottom TL;DR : 22% federal flat rate upfront, but your true tax matches brackets at filing—often a refund awaits. Check paystub details and consult a pro for your state.
Information gathered from public forums or data available on the internet and portrayed here.