How bonuses are taxed, and why the check looks so small
A bonus is not taxed at a special rate. It is withheld at one, which is a different thing, and the difference explains why a $5,000 bonus arrives as $3,400 and why some of that comes back in April.
The flat 22% withholding
The IRS lets employers treat a bonus as supplemental wages and withhold federal income tax at a flat 22%, up to $1 million in supplemental pay for the year. Above that it is 37%. Social Security and Medicare come out as normal, and so does state tax where there is one.
On a $5,000 bonus that is $1,100 of federal withholding plus $382.50 of FICA, so about $3,517 in hand before any state tax.
Why it is not the real rate
When you file, the bonus is added to your other wages and taxed at whatever bracket the total lands in. A single filer on $60,000 is in the 12% bracket, so a bonus taxed at 22% through payroll was over-withheld and the difference returns as part of the refund. Someone in the 24% bracket was under-withheld by two points and owes the gap.
Adding a $5,000 bonus to $60,000 raises the year's federal income tax from $5,020 to $5,620, a difference of $600. That is the true federal cost of the bonus, against the $1,100 withheld.
The aggregate method
Some employers pay the bonus in the same check as regular wages and withhold on the combined amount using the normal tables. That can withhold more than 22%, because a single large check looks like a very high salary to the withholding formula. It is still reconciled at filing time.
What you can do
Nothing about the withholding, but a traditional 401(k) contribution from the bonus reduces the taxable amount, and many plans let you set a separate percentage for bonus pay. If your bonus pushes you toward the next bracket, that is the year to use it.
Run your own numbers
Every figure above came from the paycheck calculator with 2026 rates.
Frequently asked questions
Is a bonus taxed at 40%?
No. Federal withholding is a flat 22%, plus 7.65% for Social Security and Medicare, plus state tax. The total withheld can approach 35% in a high-tax state, but the bonus is taxed as ordinary income when you file and any over-withholding is refunded.
Does a bonus count toward the Social Security wage base?
Yes. A bonus paid after you have passed $184,500 for the year has no Social Security tax on it at all, which is why year-end bonuses to high earners look larger than expected.
Are sign-on bonuses taxed the same way?
Yes, they are supplemental wages. The extra wrinkle is that a sign-on bonus you have to repay if you leave early was taxed when you received it, and reclaiming that tax on repayment is awkward. Read the clawback clause before you accept.
Read next
- How a raise affects your paycheck, and the bracket mythWhat a raise actually adds to take-home, and why crossing a bracket never costs you money.
- Traditional or Roth 401(k): what changes on your paycheckThe same contribution, two different paychecks.
- How to read a US pay stub, line by lineWhat each line on a pay stub means, in the order payroll applies it, with a $60,000 example showing how gross becomes net in 2026.
- Every paycheck deduction, in orderThe parent page for all of these.
Hadi · Developer and maintainer
Federal tables checked against the IRS 2026 inflation adjustments on . State figures, where quoted, are each state's latest published schedule, 2025; federal figures are 2026.