Quick Answer
Bonuses aren't actually taxed at a higher rate — they're withheld at a flat 22% federal rate (plus state taxes and FICA). Your employer uses the supplemental wage withholding method, which assumes this is extra income on top of your regular salary. You'll get any overwithholding back as a refund when you file your tax return.
Best Answer
Sarah Chen, CPA
Best for employees receiving their first bonus or occasional bonuses under $1 million
How bonus withholding actually works
Your bonus isn't taxed at a higher rate — it's withheld at a different rate. According to IRS Publication 15-T, employers must use the "supplemental wage" withholding method for bonuses, which applies a flat 22% federal withholding rate regardless of your actual tax bracket.
This often results in over-withholding because the IRS assumes your bonus is extra income on top of your regular salary, not a replacement for it.
Example: $75,000 salary with $5,000 bonus
Let's say you earn $75,000 annually and receive a $5,000 bonus:
Regular paycheck withholding (biweekly $2,885):
Bonus check withholding ($5,000):
Notice the bonus is withheld at 22%, but your actual tax bracket on $80,000 total income is still mostly 12%. You're likely overwithholding by about $500, which you'll get back as a refund.
Why employers use the flat 22% rate
The IRS requires this method because bonuses are unpredictable. Your payroll system calculates regular withholding by assuming your current paycheck represents your annual income. A bonus would throw off this calculation, potentially under-withholding for the year.
The 22% rate covers most employees' actual tax liability without requiring complex calculations for each bonus.
Key factors that affect your bonus withholding
What you should do
Don't panic about the high withholding — track your total withholding for the year. If you're consistently overwithholding on bonuses, consider adjusting your W-4 to claim additional withholding allowances, but be careful not to under-withhold overall.
Use our W-4 optimizer tool to calculate the right withholding balance for your total compensation including bonuses.
Key takeaway: Bonuses are withheld at a flat 22% federal rate, often resulting in overwithholding that you'll recover as a tax refund. Your actual tax rate on the bonus depends on your total income for the year.
Key Takeaway: Bonuses are withheld at 22% federally but taxed at your marginal rate — usually resulting in overwithholding you'll get back as a refund.
Federal bonus withholding rates by bonus amount
| Bonus Amount | Federal Withholding Rate | Typical Total Withholding (with FICA + State) | Notes |
|---|---|---|---|
| Under $1 million | 22% | 30-40% | Standard supplemental rate |
| Over $1 million | 37% | 45-50% | Higher flat rate for large bonuses |
| Regular paycheck (comparison) | Varies by bracket | 20-30% | Based on annualized income |
More Perspectives
Marcus Rivera, CFP
Best for employees in higher tax brackets where bonus withholding may be closer to accurate
Why high earners see different bonus math
If you're earning $150K+, that flat 22% bonus withholding rate might actually be under-withholding for your situation. Your marginal tax rate is likely 24% or higher, plus you may face additional complications.
Example: $200,000 salary with $20,000 bonus
At $220,000 total income:
Additional considerations for high earners
NIIT (Net Investment Income Tax): If you have investment income, bonuses can push you over the $250,000 threshold (married filing jointly) or $200,000 (single), triggering an additional 3.8% tax.
State tax implications: High-tax states like California (13.3% top rate) or New York (10.9%) mean your total withholding on bonuses could approach 35-40%.
Quarterly estimated payments: If bonuses are a regular part of your compensation, you may need to make estimated payments to avoid underpayment penalties.
Strategic bonus timing
Consider asking your employer to defer bonuses to the following tax year if you're close to bracket thresholds or facing AMT issues. This requires planning with your tax professional.
Key takeaway: High earners may find 22% bonus withholding insufficient and should monitor total tax liability to avoid underpayment penalties.
Key Takeaway: High earners may find 22% bonus withholding insufficient and should monitor total tax liability to avoid underpayment penalties.
Sarah Chen, CPA
Best for employees with multiple W-2 jobs or significant side income
Multiple jobs complicate bonus withholding
When you have multiple jobs, bonus withholding becomes trickier because each employer calculates withholding independently, not knowing about your other income sources.
Example: Two jobs scenario
Job 1: $50,000 salary + $3,000 bonus
Job 2: $40,000 salary
Total income: $93,000
Each employer assumes their paycheck represents your total income:
The multiple jobs withholding trap
With multiple jobs, you're likely under-withholding overall because:
1. Each job uses tax brackets from zero
2. Combined income pushes you into higher brackets
3. Bonus withholding assumes lower total income
What you should do
Complete the Multiple Jobs Worksheet on Form W-4 for accurate withholding. Consider having extra withholding taken from the higher-paying job or the one that pays bonuses.
Alternatively, make quarterly estimated tax payments to cover the shortfall.
Key takeaway: Multiple jobs often lead to under-withholding overall, even if individual bonuses seem heavily taxed — plan for additional payments at year-end.
Key Takeaway: Multiple jobs often lead to under-withholding overall, even if individual bonuses seem heavily taxed — plan for additional payments at year-end.
Sources
- IRS Publication 15-T — Federal Income Tax Withholding Methods - Supplemental Wages
- IRS Publication 15 — Employer's Tax Guide - Supplemental Wage Payments
Related Questions
Reviewed by Sarah Chen, CPA on February 28, 2026
This content is for educational purposes only and is not a substitute for professional tax advice. Consult a qualified tax professional for advice specific to your situation.