How Bonuses Are Taxed in 2026 — The Real Rate Explained
The #1 misconception about bonuses: they're taxed at a special "bonus rate." They're not. Bonuses are taxed as ordinary income at your regular marginal rate. What is different is the withholding — your employer withholds 22% flat on bonuses, which may be more or less than your actual tax rate. Here's how it really works.
See your bonus after taxes with the Bonus Tax Calculator.
Withholding vs Actual Tax
| Concept | What Happens |
|---|---|
| Withholding (when you receive the bonus) | Employer withholds 22% federal (flat rate method) |
| Actual tax (when you file your return) | Bonus is added to regular income, taxed at your marginal rate |
| The difference | You either get a refund or owe more, depending on your bracket |
If your marginal tax rate is 12%, the 22% withholding is too high — you'll get the overage back as a refund. If your marginal rate is 32%, the 22% withholding is too low — you'll owe more at tax time.
What Gets Taken Out of Your Bonus
| Tax | Rate | On a $10,000 Bonus |
|---|---|---|
| Federal income tax withholding | 22% | $2,200 |
| Social Security | 6.2% | $620 |
| Medicare | 1.45% | $145 |
| State income tax | Varies (0–13.3%) | $0–$1,330 |
| Total withheld | ~30–43% | $2,965–$4,295 |
| Net bonus received | $5,705–$7,035 |
A $10,000 bonus shrinks to $5,700–$7,000 after all withholding. The exact amount depends on your state.
Why Bonuses "Feel" More Taxed
Your regular paycheck has withholding calibrated to your expected annual income — so it roughly matches your effective tax rate. But a bonus is treated as "supplemental income" with a flat 22% federal withholding, regardless of your actual bracket.
| Your Marginal Rate | Regular Paycheck Withholding (effective) | Bonus Withholding | Difference |
|---|---|---|---|
| 10% | ~8% | 22% | Over-withheld by 14% |
| 12% | ~10% | 22% | Over-withheld by 12% |
| 22% | ~17% | 22% | About right |
| 24% | ~20% | 22% | Slightly under-withheld |
| 32% | ~26% | 22% | Under-withheld by 10% |
For people in the 10–12% brackets, the 22% withholding takes significantly more than they'll owe — but they get it back at tax time. For high earners in the 32%+ brackets, the 22% isn't enough, and they'll owe more.
The $1 Million+ Bonus Rule
For bonus amounts exceeding $1 million, the withholding rate jumps:
| Bonus Amount | Federal Withholding Rate |
|---|---|
| Up to $1,000,000 | 22% |
| Over $1,000,000 | 37% on the excess |
A $1.5 million bonus: 22% on the first $1M ($220,000) plus 37% on the remaining $500K ($185,000) = $405,000 in federal withholding.
Two Methods Your Employer Might Use
Percentage Method (Most Common)
A flat 22% is withheld from the bonus. Simple and predictable.
Aggregate Method
The bonus is added to your regular paycheck, and withholding is calculated as if the combined amount were your regular pay. This often results in higher withholding because the system assumes you earn that inflated amount every pay period.
You can't choose which method your employer uses, but understanding which one they apply explains why your net bonus may differ from expectations.
For a deeper look at the two withholding methods, see Aggregate vs Percentage Method. For strategies to keep more of your bonus, read How to Reduce Tax on Your Bonus. And for year-end planning, check Year-End Bonus Tax Planning.
Share this article