Bonuses are taxed differently than your regular paycheck. See exactly how much of your bonus you'll actually take home — before you start spending it.
The IRS allows two methods for withholding on supplemental wages (bonuses, commissions, etc.). The flat rate method withholds 22% federal tax on bonuses under $1 million — it's simple but may overwithhold if you're in a lower bracket, and will underwithhold if you're in the 32% or higher bracket. The aggregate method treats the bonus as if it were part of your regular paycheck and withholds based on your annual income.
Your actual tax liability on the bonus is calculated at your marginal rate when you file your return. If more was withheld than owed, you get it back as a refund. If less was withheld, you'll owe the difference. The withholding method only affects timing — not your total tax bill.
The IRS treats bonuses as supplemental wages, which means they get withheld differently than your regular paycheck. There are two methods employers can use: the flat rate method and the aggregate method. Understanding the difference matters because your W-2 at year-end reflects your actual tax liability — not your withholding — so money over-withheld comes back as a refund.
The flat rate method withholds a straight 22% for federal income tax on any bonus under $1 million. It's simple and predictable. If your bonus is $10,000, $2,200 goes to federal tax withholding regardless of your tax bracket. For high earners in the 32% or 35% bracket, this method actually under-withholds — you may owe more at filing. For those in the 12% bracket, it over-withholds and you'll get money back.
The aggregate method adds your bonus to your most recent regular paycheck and withholds based on the combined amount as if you earned that every pay period. This often results in higher withholding because the combined number pushes you into a higher bracket temporarily. It more closely mirrors your actual annual tax situation but can feel like a bigger hit on the day you receive the bonus.
Your bonus is subject to the same four taxes as your regular wages: federal income tax, state income tax, Social Security, and Medicare. The only difference is how the withholding is calculated upfront. At tax time, your bonus is simply added to your total W-2 income and taxed at your marginal rate like everything else.
FICA taxes apply to bonuses the same way they apply to regular wages. In 2026, Social Security is 6.2% on wages up to $176,100. Medicare is 1.45% with no cap, plus an additional 0.9% on wages above $200,000 for single filers. There's no flat-rate exception for bonuses here — it's straight percentage withholding.
You can't avoid the taxes, but you can manage the withholding. Contributing a portion of your bonus to a 401(k) or traditional IRA reduces your taxable income dollar-for-dollar. If your employer allows it, you can ask your HR department to use the aggregate method or flat rate — whichever is more favorable for your bracket. Some employees also adjust their W-4 withholding in advance to account for an expected bonus.