Bonus
Your bonus was not taxed at 40%
It was withheld at it. The difference is worth real money, and it comes back on your return. Here is what your employer takes, under both methods the IRS allows.
Changes the answer more than people expect: social security stops at $184,500.00 for the year, so the same bonus can cost less in December than in March.
What lands in your account
$1,482.50 withheld — 29.6% of the bonus
- Bonus
- $5,000.00
- Federal withholding (flat 22%)
- −$1,100.00
- Social security
- −$310.00
- Medicare
- −$72.50
- Texas withholding
- −$0.00
- Take-home
- $3,517.50
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The part everyone gets wrong
Withholding is a prepayment, not a rate
A bonus is ordinary income. It goes on your return next to your salary and is taxed at the same brackets. What is different is how your employer hands money to the IRS during the year — and for a bonus, the rules let them use a blunt instrument.
If your marginal rate is 12% or 22%, a flat 22.00% withholding is roughly right and you will not notice. If it is 32% or 35%, the bonus is under-withheld and you may owe in April. The complaint is nearly always the opposite — someone in the 12% bracket watching a quarter of their bonus disappear — and for them the over-withheld part comes back as refund.
Percentage method
A flat 22.00% on the bonus. Publication 15 is blunt about it: "no other percentage allowed". It ignores your Form W-4 entirely, so dependents and extra withholding change nothing.
Available only if your employer withheld income tax from your regular wages this year or last. If they did not, they must use the other method.
Aggregate method
The bonus is added to a normal paycheck, withheld on as if the whole thing were one ordinary payment, and then the tax the regular wages alone would have taken is subtracted.
This one does read your W-4, which is why the same bonus can land differently at two employers and both be following the rules.
Worked amounts
A bonus at the flat rate
| Bonus | Federal | Social security + Medicare | You keep | Withheld |
|---|---|---|---|---|
| $1,000.00 | −$220.00 | −$76.50 | $703.50 | 29.6% |
| $2,500.00 | −$550.00 | −$191.25 | $1,758.75 | 29.6% |
| $5,000.00 | −$1,100.00 | −$382.50 | $3,517.50 | 29.6% |
| $10,000.00 | −$2,200.00 | −$765.00 | $7,035.00 | 29.6% |
| $25,000.00 | −$5,500.00 | −$1,912.50 | $17,587.50 | 29.6% |
No state tax included in this table — pick your state in the calculator above for that. Assumes wages under the social security wage base of $184,500.00 for the year.
Timing
The same bonus is cheaper in December
Social security withholding stops for the year once your wages pass $184,500.00. A bonus paid after you cross that line keeps the 6.20% that would otherwise have gone out — on a $10,000.00 bonus that is $620.00. Pulling in the other direction, once your wages pass $200,000.00 an extra 0.90% of Medicare begins, and Publication 15 says employers apply that threshold regardless of filing status. Enter your year-to-date wages in the calculator and both effects show up.
Questions
Why was my bonus taxed at 40%?
It almost certainly was not taxed at 40% — it was withheld at that rate, which is a different thing. Under the percentage method an employer withholds a flat 22.00% in federal income tax, plus 6.20% social security and 1.45% Medicare, plus your state. That lands near 30% before state tax and higher after it. Your actual tax on the bonus is settled on your return at your ordinary rates, so over-withholding comes back as refund.
Is there a special bonus tax rate?
No. There is a special *withholding* rate. IRS Publication 15 lets an employer withhold a flat 22.00% on supplemental wages, and it is specific that no other percentage is allowed — an employer cannot decide to withhold 10% or 25% instead. The bonus itself is ordinary income.
Why do two people with the same bonus take home different amounts?
Usually because their employers used different methods. The percentage method ignores your Form W-4 completely. The aggregate method adds the bonus to a regular paycheck and withholds on the total as if it were ordinary pay, so dependents, extra withholding and filing status all move the number. Same bonus, same law, two legal answers — and you do not get to pick.
Does the timing of a bonus change what I keep?
Yes, and it is the most overlooked part. Social security withholding stops once your wages for the year pass $184,500.00, so a bonus paid in December after you have hit that cap keeps 6.20% more than the same bonus paid in March. Working the other way, once your wages pass $200,000.00 an extra 0.90% of Medicare starts.
What happens above $1 million?
The part of your calendar-year supplemental wages over $1,000,000.00 is withheld at 37.00%, and Publication 15 says that is done "without regard to the employee's Form W-4". The threshold also counts payments from all businesses under common control, not just the one writing this cheque.
Is a commission or severance payment the same as a bonus?
For withholding, yes. Publication 15 puts commissions, overtime, severance, back pay, awards, prizes and accumulated sick leave in the same supplemental-wages bucket as bonuses. Employers may choose to treat overtime and tips as regular wages instead, which is why two payslips can handle overtime differently and both be correct.
Where these figures come from
- IRS Publication 15 (2026), section 7 — Supplemental Wages, and section 12 — FICA
- IRS Publication 15-T (2026) — the percentage-method tables behind the aggregate calculation
Federal rules last checked 2026-08-20. State withholding uses the same engine as our paycheck calculators, across 21 states. Some states publish their own flat supplemental rate; those are not applied here until each one has been read from that state's own source. Estimates only — not tax advice.