Why is my bonus taxed at a higher rate than my salary?

Bonuses are withheld at a flat 22% supplemental federal rate, which may be higher than your effective rate on regular pay. However, this is withholding, not your actual tax rate. If 22% is more than your marginal rate on the bonus income, you get the excess back as a refund. Your bonus is subject to ordinary income tax rates — the same as salary.

Can I ask my employer to not withhold taxes on my bonus?

No — employers are legally required to withhold taxes on supplemental wages. You cannot opt out of withholding. You can, however, request that your employer use the aggregate method instead of the flat rate, which may result in lower withholding if you are in the 10% or 12% bracket.

What if I put my entire bonus into my 401(k)?

You can elect to contribute your bonus to your 401(k) (if your plan allows and you have not hit the $23,500 limit). A pre-tax 401(k) contribution from your bonus avoids federal income tax withholding on the contribution amount — though FICA still applies. Employers must approve this election; not all plans allow bonus contributions.

Is a year-end bonus taxed differently than other bonuses?

No — the type or timing of the bonus does not change the withholding method. Year-end bonuses, signing bonuses, spot bonuses, and performance bonuses are all treated as supplemental wages and subject to the same 22% flat withholding (or aggregate method). Signing bonuses that require repayment if you leave early may have special tax treatment if you do actually repay them.

If I defer my bonus to my 401(k), when do I pay taxes on it?

Pre-tax 401(k) contributions defer the income tax — you pay when you withdraw in retirement. FICA taxes (Social Security and Medicare) are still collected on the bonus at the time it is paid, even if it goes directly to a 401(k). The 401(k) contribution reduces income tax withholding on the bonus, but FICA comes out regardless.

Bonus Tax Withholding: Why Your Bonus Check Looks So Small

Every year, millions of workers are disappointed when their bonus check arrives smaller than expected — often losing 30-40% to withholding. Understanding why bonuses are withheld at seemingly high rates, whether this is fair, and what you can do about it helps you plan your bonus income accurately.

How the IRS Requires Bonuses to Be Withheld

The IRS classifies bonuses as 'supplemental wages' and allows employers to withhold federal taxes using either: (1) The flat 22% rate (for bonuses under $1 million) — simple and most common, or (2) The aggregate method — add the bonus to your last regular paycheck, withhold on the combined amount at your actual marginal rate, subtract regular check’s tax.

Federal bonus tax withholding methods

Withholding Method	How It Works	Result for Typical Worker
Flat Rate (22%)	$5,000 bonus × 22% = $1,100 federal withheld	Simple; same effective rate for all below $1M
Aggregate Method	Add $5,000 to paycheck; withhold on combined amount	Higher withholding for higher earners; lower for lower earners
High earner (>$1M)	37% mandatory flat rate on excess above $1M	Highest withholding

ℹ️Bonus Withholding Is Not Your Final Tax Rate

22% withholding on a bonus is not a special 'bonus tax.' Your bonus is regular income taxed at the same rates as your salary. If your overall effective rate is 18%, you will receive the over-withheld amount back as a tax refund. The 22% is an estimate — your true tax on the bonus is determined at annual filing.

Total Bonus Deductions (Federal + FICA + State)

Federal income tax: 22% flat (or aggregate method)
Social Security: 6.2% (if still under the $176,100 annual wage base)
Medicare: 1.45% (no cap; always applies)
State income tax: varies by state (0-13.3%); often withheld at supplemental rate
Total effective withholding: approximately 28-40% depending on income level and state
Example: $5,000 bonus in California: 22% federal + 7.65% FICA + 10.23% CA = ~40% withheld = $2,000 net bonus

Will You Get Over-Withheld Bonus Taxes Back?

If 22% federal withholding on your bonus exceeds your actual marginal rate (possible for lower-income workers), you will receive the excess back as a tax refund. If your actual marginal rate is above 22% (24% or higher bracket), you may owe additional taxes on the bonus at year-end. The bonus withholding is just an estimate — your Form 1040 reconciles everything annually.

Calculate Your Net Bonus After Taxes

Enter your bonus amount and salary to see exactly how much you will actually receive after federal, FICA, and state withholding.

Open Take-Home Pay Calculator →

Bonus Tax Withholding: Why Your Bonus Check Looks So Small

How the IRS Requires Bonuses to Be Withheld

Total Bonus Deductions (Federal + FICA + State)

Will You Get Over-Withheld Bonus Taxes Back?

Frequently Asked Questions

Frequently Asked Questions

More Take-Home Pay Guides

How to Use a Take-Home Pay Calculator: Complete Guide

How Federal Income Tax Withholding Works: A Complete Explanation

How FICA Taxes Work: Social Security and Medicare on Your Paycheck