US Bonus Tax Calculator

Bonuses are not actually taxed at a higher rate than your salary - but they are usually withheld at a higher rate, which makes the take-home feel small. The IRS has two methods employers can use for bonus withholding. Most use the flat supplemental rate: 22% federal on bonuses up to $1 million, 37% above that. Some use the aggregate method, which adds the bonus to your most recent regular paycheck and withholds at the resulting bracket.

On a $10,000 bonus for someone in the 22% federal bracket, the supplemental method withholds $2,200 federal, plus 6.2% SS, 1.45% Medicare, plus state. Take-home is roughly $6,500-7,200 depending on state. Come tax time, your actual liability is calculated on the full year's income at your true rates, so any over-withholding from the bonus comes back as a refund.

If your effective marginal rate is 32% or higher, the 22% supplemental withholding leaves you owing money in April. A $50,000 bonus for someone in the 32% bracket withholds $11,000 federal but actually owes $16,000 - a $5,000 underpayment. To avoid the surprise, increase your W-4 withholding for the rest of the year or make an estimated tax payment.

Conversely, if you are in the 12% bracket and got a $20,000 bonus, the 22% supplemental withholding takes $4,400 when you only owe $2,400. The $2,000 difference comes back as a refund the following April. The W-4 cannot fix this directly because supplemental withholding bypasses the W-4; you have to wait for filing.

FICA hits bonuses identically to regular wages: 6.2% Social Security (until you cross the wage base), 1.45% Medicare. State and local tax usually applies at flat supplemental rates too: California 10.23%, New York 9.62% supplemental, plus local income tax in cities like NYC and Philadelphia. Total withholding on a bonus in NYC easily reaches 40-45%.

Year-end bonuses paid in late December can sometimes be deferred to January (consult your employer/HR) to push the income into the next tax year if you expect a lower-bracket year ahead. The same trick works in reverse if you are expecting a windfall next year and want to absorb a bonus this year.

RSU vesting is treated like a cash bonus for tax purposes - the value at vest is income, withheld at supplemental rates (often via 'sell to cover' where the employer sells some of the shares to cover withholding). Stock options and ESPP discounts have their own complex rules. Always sanity-check year-end W-2 against grant statements; mistakes are common.

If you get RSUs in tech, the effective withholding is usually under-withholding for high earners. Set aside an extra 10-15% of the gross RSU value for April tax bills. Keep [US Income Tax Calculator](/us-income-tax-calculator) projections updated through the year if a big chunk of compensation is equity-based.