How it works
American payroll withholds tax on a bonus through a shortcut, and the shortcut is why the deposit looks so much smaller than the number on the offer letter. Instead of running the bonus through your W-4 like ordinary wages, the IRS lets an employer treat it as *supplemental wages* and withhold at a flat 22% — IRS Publication 15, the flat-rate method. Layer Social Security and Medicare on at 7.65% and add your state's marginal rate, and a $5,000 bonus in a 5% state lands at $3,267.50: $1,100 federal, $382.50 FICA, $250 state, a keep rate of 65.4%. Nothing here is a special bonus tax rate. The 22% is withholding, not liability. At filing the bonus simply stacks onto your annual income and is taxed at your marginal bracket along with everything else, which means the flat rate is only ever an interim estimate. If your true bracket is 12%, payroll prepaid ten points too much and roughly $500 of that $1,100 returns inside your refund. If your bracket is 24%, 32% or 37%, the flat rate under-withheld and you settle the difference in April — $100, $500 or $750 short on a $5,000 bonus respectively. Read the output as a cash-flow forecast, never as a tax bill. The Social Security piece is where a calendar detail turns into real money. Social Security tax stops at the annual wage base — $184,500 for 2026, per the Social Security Administration, which caps the employee OASDI contribution at $11,439 — while Medicare's 1.45% has no ceiling at all. So the 6.2% slice applies only until your year-to-date wages cross that base. A $5,000 bonus in February pays $310 of Social Security tax; the identical bonus in December, after you have already earned past $184,500, pays nothing on that slice and nets $3,577.50 instead of $3,267.50 — a keep rate of 71.6% rather than 65.4%. That is exactly what the "Already past Social Security cap" toggle models, and at $310 per $5,000 it is the largest lever on the page for a high earner. One tier is mandatory rather than optional. Once an employer has paid you more than $1,000,000 of supplemental wages in a calendar year, the excess is withheld at 37%, not 22% — again Publication 15. On a $2,000,000 bonus the first million is withheld at 22% and the second at 37%, giving $590,000 of federal withholding; add $29,000 of Medicare and the take-home is $1,381,000, or 69.1% of gross. It is a narrow case, but the arithmetic is unforgiving if you assume the flat rate applies all the way up. Three limitations are worth knowing before you plan around the number. The model is purely proportional, so the keep rate is identical at $5,000 and at $10,000 — 65.4% both times — and it cannot show you bracket creep. It ignores the Additional Medicare Tax of 0.9% on wages above $200,000 for a single filer or $250,000 for a married couple filing jointly, so a high earner's estimate is optimistic by that much on the excess. And it cannot know whether your employer uses the *aggregate method* — adding the bonus to a regular paycheque and withholding as though that were your new normal — which Publication 15 permits as an alternative to the flat rate and which produces a different figure entirely. Treat the output as a planning estimate within a few percentage points.
Formula
Federal = min(bonus, 1,000,000) x flat rate + max(0, bonus - 1,000,000) x 37%
FICA = bonus x 7.65% (6.2% Social Security + 1.45% Medicare)
or bonus x 1.45% once YTD wages pass the wage base
State = bonus x state marginal rate
Take-home = bonus - Federal - FICA - State
Worked example - $5,000 bonus, 22% federal, 5% state, wages below the 2026 wage base
Federal = 5,000 x 22% = $1,100.00
FICA = 5,000 x 7.65% = $382.50
State = 5,000 x 5% = $250.00
Take-home = $3,267.50 keep rate 65.4%
Same bonus, already past the 2026 Social Security wage base ($184,500)
FICA = 5,000 x 1.45% = $72.50
Take-home = $3,577.50 keep rate 71.6% (+$310)
Same bonus in a state with no income tax
Take-home = $3,517.50 keep rate 70.4%
The mandatory $1m tier - a $2,000,000 bonus
Federal = 1,000,000 x 22% + 1,000,000 x 37% = $590,000.00
Medicare= 2,000,000 x 1.45% (past the wage base) = $29,000.00
Take-home = $1,381,000.00 keep rate 69.1%
What the flat rate gets wrong at filing, on a $5,000 bonus
True bracket 12% -> $500 refunded (22% - 12%) x 5,000
True bracket 22% -> settled exactly
True bracket 24% -> $100 owed (24% - 22%) x 5,000
True bracket 32% -> $500 owed (32% - 22%) x 5,000
True bracket 37% -> $750 owed (37% - 22%) x 5,000
Sources: IRS Publication 15 (flat 22%, mandatory 37% above $1m of supplemental
wages); SSA 2026 contribution and benefit base $184,500, maximum OASDI $11,439.
Tips
- Read the 22% as a withholding rate, not a tax rate. Your bonus is taxed at your marginal bracket when you file, so a 12% bracket worker gets roughly $500 of a $5,000 bonus back as refund while a 32% bracket worker owes about $500 more.
- Time a bonus late in the year if you can choose. Once year-to-date wages pass the 2026 Social Security wage base of $184,500, the 6.2% slice stops — worth $310 per $5,000 and worth a lot more on a large bonus.
- Pre-fund the April gap if your bracket sits above 22%. The shortfall is mechanical: $100 on a $5,000 bonus at 24%, $500 at 32%, $750 at 37%. Move that amount to savings when the bonus lands rather than meeting it cold at filing.
- Decide where the net goes before it arrives. A bonus that lands in a current account gets absorbed within weeks; one that is auto-routed to a high-yield account, a debt payoff or an IRA on the day it clears survives intact.
- Read the clawback clause on a signing bonus before spending a cent of it. Signing bonuses are withheld exactly like performance bonuses, but they are frequently repayable if you leave within a year or two, and tax already remitted is not returned with the repayment.
Frequently asked questions
- Why is my bonus taxed so much more than my salary?
- It usually is not taxed more overall. Payroll applies the flat 22% federal supplemental rate plus 7.65% FICA plus your state rate all at once, which looks brutal next to the gradual withholding on a salary cheque. On a $5,000 bonus in a 5% state that is $1,732.50 withheld at once, leaving $3,267.50 — but at filing the bonus blends into ordinary income and any over-withholding returns in your refund.
- How much do you take home from a $5,000 bonus?
- With the default assumptions — 22% federal, 5% state, wages below the Social Security wage base — you net $3,267.50, keeping 65.4%. That is $1,100 of federal withholding, $382.50 of FICA and $250 of state tax. In a state with no income tax the same bonus nets $3,517.50, and past the Social Security wage base it nets $3,577.50.
- What is the federal supplemental withholding rate?
- 22% on supplemental wages up to $1,000,000 in a calendar year, rising to a mandatory 37% on everything above that threshold, per IRS Publication 15. Employers may alternatively use the aggregate method — adding the bonus to a regular paycheque and withholding as though that were your normal rate — but the flat percentage is by far the most common treatment for bonuses.
- Will I get bonus taxes back on my tax return?
- Partly, if the withholding overshot your true liability. A worker whose marginal bracket is 12% effectively prepaid ten points on the whole bonus — about $500 on $5,000. Brackets above 22% work in reverse: at 24% you owe roughly $100, at 32% about $500, and at 37% about $750. The flat rate is a convenience for payroll, not a statement about your tax.
- Does the Social Security cap apply to bonuses?
- Yes. Social Security tax applies only to the first $184,500 of wages in 2026, per the SSA, capping the employee contribution at $11,439. Medicare's 1.45% has no cap. So a bonus paid after your year-to-date wages cross that base skips the 6.2% slice entirely — $310 saved per $5,000 — which is exactly what the toggle models.
- Are signing bonuses taxed differently than performance bonuses?
- Not at withholding level — both are supplemental wages facing the same flat 22% federal treatment, plus FICA and state tax. The difference is contractual. Signing bonuses frequently carry a repayment clause if you leave within a year or two, and because the tax was already remitted to the IRS, repaying the gross does not return the withheld portion to you.
- What does this calculator leave out?
- Three things. It is purely proportional, so the keep rate is identical at $5,000 and $10,000 and it cannot show bracket creep. It ignores the Additional Medicare Tax of 0.9% on wages above $200,000 single or $250,000 married filing jointly. And the state rate is capped at 15%, which covers most states but not a top-bracket earner in the highest-tax ones.
- Is the 22% withholding mandatory for my employer?
- Publication 15 permits either the flat 22% rate or the aggregate method, so your employer can lawfully withhold a different amount. That is why a bonus can arrive with an unexpectedly round or unusually large deduction. If the figure matters to your cash flow, ask payroll which method they use before the bonus is paid.