Bonus Tax Calculator

Federal withholding = the taxable part of the bonus x the flat supplemental rate, currently 22 percent, or 37 percent on supplemental pay past one million dollars in a year. Social Security = 6.2 percent, but only up to the yearly wage base. Medicare = 1.45 percent, with no ceiling. Money sent to a traditional 401(k) is taken out before income tax but not before Social Security and Medicare.

Are bonuses taxed at a higher rate than salary?

No. A bonus is ordinary income and is taxed at exactly the same rates as your salary. What is different is withholding: your employer is allowed to hold back a flat 22 percent instead of working out your normal rate. If your real rate is lower, the extra comes back as part of your refund.

Why was 22 percent taken when I am in the 12 percent bracket?

Because 22 percent is the flat supplemental withholding rate, not a bracket. It has nothing to do with your income. You will settle up when you file, and in that case you would get most of the difference back.

What is the aggregate method?

Instead of the flat rate, an employer can add the bonus onto your regular paycheck and withhold as though you earned that much every period. It usually holds back more, because one big check looks like a very high salary. The final tax you owe is the same either way.

Can I avoid tax on a bonus by putting it in my 401(k)?

You can defer the income tax, not the payroll tax. Money going into a traditional 401(k) is not taxed as income this year, but Social Security and Medicare are still charged on it. Enter a percentage above to see the effect.

Is the 22 percent rate the same in every state?

The 22 percent is federal. States set their own, and many have a separate flat supplemental rate of their own. Nine states take no income tax at all, in which case leave the state field at zero.

Why does a second bonus later in the year look different?

Social Security stops once your wages for the year pass the wage base. A bonus paid after that point is not charged the 6.2 percent, so more of it reaches you. Enter what you have already earned above to see this.