Why Is My Bonus Taxed So Much?
You got a bonus, looked at the deposit, and roughly a third was gone. The good news: your bonus is not taxed at a higher rate than your salary. It's withheld differently — and the difference often comes back to you.
Bonuses are "supplemental wages"
The IRS treats bonuses, commissions, and similar payments as supplemental wages. The most common way employers handle them is the percentage method: a flat 22% federal withholding (and 37% on any portion of a bonus above $1 million). On top of that, your bonus is still subject to:
- Social Security — 6.2%
- Medicare — 1.45% (plus 0.9% more on wages over $200k single / $250k married)
- State income tax — most states withhold at their own supplemental rate
Add those up and roughly 30–40% of a typical bonus is withheld before it reaches you. That's why it feels punitive.
Withholding is not your final tax
Here's the key: that 22% is withholding, not your actual tax bill. Your bonus is ultimately taxed at your normal rates based on your total income for the year, just like the rest of your pay. When you file, the IRS reconciles what was withheld against what you actually owe. If the flat 22% was more than your real marginal rate, the difference comes back as part of your refund.
It also feels high because your regular paychecks are withheld at your blended average rate (after the standard deduction and lower brackets), while the bonus is withheld at a flat rate near your marginal rate. In a progressive system, marginal is always higher than average.
The aggregate method
Some employers instead lump your bonus together with a regular paycheck and withhold based on your W-4 (the "aggregate method"). This can withhold even more up front because it briefly treats your pay as if you earn that much every period — but again, it all evens out at filing.
See your real number
Want to know what you'll actually keep from a specific bonus in your state? Try the bonus tax calculator — or read how paycheck taxes work for the full picture.