Why Bonuses Are Taxed Differently Than Salary
The IRS classifies bonuses as supplemental wages — meaning they are taxed through a special withholding method rather than the regular payroll withholding table. The most common approach is a flat 22% federal withholding. This is a withholding rate, not your actual tax rate — it is a prepayment that gets reconciled when you file your annual return.
Withholding is how much your employer sends to the IRS now. Tax is what you actually owe based on annual income. If your marginal rate is 12% but 22% was withheld from your bonus, you get the extra 10% back as part of your refund. You never permanently lose over-withheld money.
Every Deduction From a $5,000 Bonus, Explained
Sample $5,000 bonus deduction breakdown — California single filer
| Deduction | Rate | Amount on $5,000 Bonus |
|---|---|---|
| Federal Income Tax (flat rate) | 22% | $1,100 |
| Social Security | 6.2% | $310 |
| Medicare | 1.45% | $72.50 |
| California State Tax (example) | 10.23% supplemental | $511.50 |
| California SDI | 1.1% | $55 |
| Total Withheld | — | $2,049 |
| Net Bonus Received | — | $2,951 |
The FICA Taxes You Cannot Avoid
Social Security (6.2%) and Medicare (1.45%) are FICA taxes. They apply to all wages including bonuses. Social Security only applies to wages up to $176,100 in 2025 — if your salary already exceeds that, no Social Security is withheld from your bonus. Medicare has no cap.
- Social Security: 6.2% on your bonus (up to the $176,100 annual wage base)
- Medicare: 1.45% on your entire bonus — no income cap
- Additional Medicare Tax: 0.9% extra if your total wages exceed $200,000 (single)
- FICA taxes are not refundable — you genuinely owe these regardless of your filing refund
- Your employer also pays matching FICA — but from their payroll, not your check
What Happens When You File Your Annual Return
Your bonus appears in Box 1 of your W-2 alongside regular salary. The IRS calculates your total tax based on all income combined. If you are in the 22% bracket and 22% was withheld, you break even on that portion. If you are in the 12% bracket, you get a refund for the 10% difference. Either way, you owe the correct amount — no more, no less.
See Your Bonus Take-Home Before It Arrives
Enter your bonus, salary, and state — get a complete breakdown of every tax withheld and your final net amount.