The myth: "bonuses are taxed at 40%"
Bonuses are taxed as ordinary income — same brackets, same rules, as if the money had been salary. What's different is the withholding. Employers using the standard percentage method hold back a flat 22% federal on supplemental wages (37% on any amount over $1 million in a year), plus Social Security, Medicare and state tax. Stack those and 30-40% of the bonus never reaches your account — which feels like a special bonus tax. It isn't. Withholding is a deposit, not a price: the real bill is settled by your bracket at filing.
Refund or bill? Depends which side of 22% you're on
- Bracket below 22% (income mostly in the 10-12% brackets): the flat 22% over-withholds — the difference comes back as a refund at filing.
- In the 22% bracket: withholding roughly matches reality.
- Bracket above 22% (24, 32, 35, 37%): the flat rate under-withholds. A $50,000 bonus for a 35%-bracket earner leaves a $6,500 federal gap to settle at tax time — worth planning for, and occasionally worth a quarterly estimated payment to dodge an underpayment penalty. Find your bracket with the tax bracket calculator.
The payroll-tax fine print
Two details this calculator handles that most bonus articles skip: Social Security stops at the wage base ($176,100 in 2025) — if your regular pay has already crossed it, a year-end bonus owes no 6.2% at all, which is why December bonuses often net more than March ones. And Medicare never stops — 1.45% always, plus 0.9% additional once total wages pass $200,000.
The aggregate method (why your stub might differ)
Some employers add the bonus to a regular paycheck and withhold as if you earned that combined amount every period — the aggregate method. A $10,000 bonus landing in a single pay period can then be withheld at 30%+ federal, as though you made $260,000 a year. Nothing is lost — the excess returns at filing — but the take-home shock is real. If the stub looks brutal, this is usually why.
Making more of a bonus stick
- Divert some to the 401(k). Most plans let you set a separate bonus deferral percentage. Money routed there skips federal and state income tax entirely (not FICA) — a 32%-bracket earner keeps $320 of every $1,000 sheltered instead of about $580 after taxes. Check the growth effect in the 401(k) calculator.
- Feed the HSA if you're eligible — the only account that also dodges payroll tax when funded through payroll; see the HSA calculator.
- Pre-commit the windfall. The classic split: some to high-interest debt (debt vs invest calculator), some to the emergency fund, a slice for fun. A plan made before the money lands beats one made after.