How Bonuses Are Taxed in 2026 (22% Withholding Explained)
How are bonuses taxed? A $5,000 bonus that lands in your account as something closer to $3,500 feels like a penalty for doing good work. It ranks among the most common payroll questions, and the answer comes down to a distinction most people never hear about: withholding isn't the same as tax.
Once that clicks, the rest follows: the IRS label for bonuses ("supplemental wages"), the two withholding methods employers pick from, how Social Security and Medicare apply, and what states do. Two worked examples then show one case where you'd likely get money back and one where you might owe a little more. Everything is tied to IRS Publication 15 (2026) and official state sources.
Estimate disclaimer: Examples are simplified estimates for a single filer taking the 2026 standard deduction. Your actual tax depends on your total income, filing status, deductions, credits and state. This isn't tax advice.
Withholding vs. Actual Tax
Start here, because everything else depends on it.
- Withholding is the amount your employer takes out of the bonus check and sends to the IRS as a prepayment.
- Your actual tax is calculated once a year on your tax return, based on your total income for the year.
A bonus is added to your other wages and taxed at your ordinary income tax rates. There's no separate "bonus tax rate" for income tax purposes. The 22% you may see is a withholding rate. If too much was withheld across the year, you get the difference back as a refund. If too little, you owe it when you file.
Bonuses Are "Supplemental Wages"
The IRS classifies bonuses as supplemental wages, along with commissions, overtime pay, severance pay, back pay, and certain awards and prizes. Supplemental wages can be withheld differently from regular wages, which is why a bonus check often looks different from a normal paycheck.
Method 1: The 22% Flat Rate (Percentage Method)
According to IRS Publication 15 (2026), the federal withholding rate on supplemental wages remains 22% because the individual tax rates were permanently extended (P.L. 119-21). Under this optional flat-rate method:
- The employer withholds 22% federal income tax on the bonus.
- It can generally use this method only when the bonus is paid separately from regular wages or identified separately in payroll records, and when income tax was withheld from your regular wages. See Publication 15, section 7, for the conditions.
- Your W-4 choices don't change the 22% rate.
Over $1 Million: Mandatory 37%
Once an employee's supplemental wages for the calendar year exceed $1 million, the employer must withhold at 37% on the excess, regardless of the employee's Form W-4. This affects few people, but it's the reason very large bonuses or equity payouts show much higher withholding.
Method 2: The Aggregate Method
Employers can also use the aggregate method, and in some situations must. Payroll:
- Adds the bonus to your regular wages for the pay period (or your most recent pay period).
- Calculates withholding on the combined amount as if it were a single regular paycheck, using your W-4 and the IRS tables in Publication 15-T.
- Subtracts the tax already withheld (or to be withheld) from the regular wages.
- Withholds the remainder from the bonus.
Why it can look so harsh: withholding tables assume each paycheck is a typical one. A big one-time check gets "annualized" as if you earned that much every pay period, which can push withholding on that check into a higher bracket. It evens out when you file, but it can make a single check look heavily taxed.
FICA on Bonuses
Bonuses are wages for Social Security and Medicare purposes too. Per IRS Publication 15 (2026):
- Social Security: 6.2%, until your total 2026 wages reach the $184,500 wage base. Once you've hit the wage base for the year, no more Social Security tax is withheld.
- Medicare: 1.45% on all wages.
- Additional Medicare Tax: your employer must withhold an extra 0.9% on wages over $200,000 in a calendar year, which can kick in with a large bonus.
So for most people, 7.65% of a bonus goes to FICA on top of income tax withholding.
State Taxes on Bonuses
States with an income tax withhold on bonuses as well, and many have their own supplemental rules or flat rates. California is a good example:
- California: The Employment Development Department says that when supplemental wages aren't paid together with regular wages, employers can withhold a flat 10.23% on bonuses and stock options and 6.6% on other supplemental wages such as overtime and commissions, or use the aggregate approach. When paid with regular wages, they're combined and withheld using the regular schedules.
Other states set their own rates, and states without an income tax on wages, such as Texas and Florida, don't withhold state income tax on bonuses. Check your state revenue or employment department for its current supplemental withholding rules.
To see how your state taxes regular pay, pick it in our take-home pay calculator, which has a page for every state and D.C.
Example 1: $5,000 Bonus on a $60,000 Salary (No State Tax)
Withholding on the bonus (22% flat method): - Federal income tax: 22% × $5,000 = $1,100 - Social Security: 6.2% × $5,000 = $310 - Medicare: 1.45% × $5,000 = $72.50 - Net bonus: about $3,517.50
Actual federal income tax on the bonus at filing: With a $60,000 salary and the 2026 standard deduction ($16,100; see our $60,000 a year after taxes breakdown), taxable income is $43,900. Adding $5,000 brings it to $48,900, still under the $50,400 top of the 12% bracket for single filers. So the bonus is actually taxed at 12%, which is $600.
Result: about $500 more was withheld than you'll owe on the bonus (assuming your regular withholding was accurate), which you'd typically get back as part of your refund.
Example 2: $10,000 Bonus on a $120,000 Salary
Withholding (22% flat method): $2,200 federal, $620 Social Security, $145 Medicare.
Actual federal income tax: taxable income before the bonus is $120,000 − $16,100 = $103,900. The 22% bracket ends at $105,700, so: - $1,800 of the bonus is taxed at 22% = $396 - $8,200 is taxed at 24% = $1,968 - Total ≈ $2,364
Result: about $164 less was withheld than you'll owe on the bonus. Not a big gap, but it explains why higher earners sometimes owe a little at tax time after a large bonus.
(Both examples ignore credits, other income and state tax, and assume regular withholding was otherwise accurate.)
Can You Reduce the Tax on a Bonus?
You can't change the tax rate on a bonus. What you may be able to do is lower your taxable income, or bring your withholding closer to what you'll actually owe.
Put Part of It Into Your 401(k)
If your plan counts bonuses as eligible compensation, you may be able to direct part of your bonus into a traditional 401(k), which generally reduces federal taxable income. The 2026 employee contribution limit is $24,500 for the year across all your plans. Check your plan's rules and your contribution election before the bonus is paid. See our 401(k) match explained guide.
Contribute to an HSA
If you're enrolled in a qualifying high-deductible health plan, HSA contributions can also reduce taxable income, within IRS limits.
Adjust Your W-4 If Needed
If you expect to owe after a large bonus, you can increase withholding for the rest of the year with a new W-4 (Step 4(c), extra withholding). If you're consistently over-withheld, the IRS Tax Withholding Estimator can help you adjust. This doesn't change your tax; it just changes when you pay it.
Timing (Use With Care)
Some people wonder whether a bonus paid in January instead of December saves tax. It moves the income into a different tax year, which can matter if your income will change a lot. But employers set bonus timing, and the effect is often small. Don't make big decisions on this alone.
Sign-On and Retention Bonuses
Sign-on bonuses are supplemental wages too, taxed the same way, and they're one reason a first paycheck can look odd. Many come with a clawback clause requiring repayment if you leave within a set period. Read that clause before you accept. Repaying a bonus can also have tax consequences, so ask HR how repayment is handled.
When you're comparing offers, put a cautious value on bonuses and check whether it's guaranteed. For the wider comparison, read evaluating a job offer, and when it's time to push back on the number, use our salary negotiation guide.
Keep Going
Bonuses are just one line in a pay package, and our salary guides cover the rest, from base pay to benefits. If you're still hunting for a role with a bonus attached, work through how to find a job in the U.S. from the first step.
Frequently Asked Questions
Are bonuses taxed at a higher rate than regular pay? Not for income tax. Bonuses are taxed at your ordinary rates when you file. Withholding on a bonus can be higher or lower than your actual tax, and the difference is settled on your return.
Why was my bonus taxed so much? Usually it's 22% federal withholding plus 7.65% FICA plus any state withholding. Under the aggregate method, payroll may also treat the bonus as if it were recurring pay, which can push withholding higher on that check.
What is the federal bonus tax rate for 2026? The federal withholding rate on supplemental wages is 22% (37% on supplemental wages over $1 million in a year), per IRS Publication 15 (2026). Your actual tax rate depends on your total income.
Will I get bonus withholding back? If total withholding for the year exceeds your actual tax, you'll get the difference as a refund. Lower and middle earners in the 10% or 12% bracket often get some bonus withholding back.
Is Social Security taken out of bonuses? Yes, at 6.2% until your total wages for the year reach the 2026 wage base of $184,500. Medicare at 1.45% applies to all wages.
Sources
- Internal Revenue Service, Publication 15 (2026), Employer's Tax Guide (supplemental wages, section 7; Social Security and Medicare rates): https://www.irs.gov/publications/p15
- Internal Revenue Service, Publication 15-T (2026), Federal Income Tax Withholding Methods: https://www.irs.gov/publications/p15t
- Internal Revenue Service, Topic No. 751, Social Security and Medicare withholding rates: https://www.irs.gov/taxtopics/tc751
- Internal Revenue Service, "IRS releases tax inflation adjustments for tax year 2026": https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill
- Internal Revenue Service, Tax Withholding Estimator: https://www.irs.gov/individuals/tax-withholding-estimator
- Internal Revenue Service, "401(k) limit increases to $24,500 for 2026": https://www.irs.gov/newsroom/401k-limit-increases-to-24500-for-2026-ira-limit-increases-to-7500
- California Employment Development Department, "California Employer's Guide" (DE 44, supplemental wages, PDF): https://edd.ca.gov/siteassets/files/pdf_pub_ctr/de44.pdf
- California Employment Development Department, Information Sheet DE 231PS, "Supplemental Wage Payments" (PDF): https://edd.ca.gov/siteassets/files/pdf_pub_ctr/de231ps.pdf