How Bonuses Are Taxed and Why Your Check Looks Smaller Than Expected

Last updated July 2, 2026

The IRS classifies bonuses as supplemental wages. When paid separately from regular wages, employers withhold federal income tax at a flat 22 percent rate on amounts under $1 million in a calendar year. Contrary to a persistent myth, this withholding rate is not a special bonus tax, it is an estimate reconciled with your actual tax liability when you file your annual return. FICA taxes apply to bonus payments the same as regular wages. A $10,000 bonus reduces to approximately $6,500 to $7,100 in after-tax take-home depending on combined federal, FICA, and state withholding.

Some employers use the aggregate method instead of the flat rate. Under this approach, the bonus is added to the most recent regular paycheck, annualized to estimate yearly income, and withholding is calculated on that combined basis. The aggregate method often results in higher withholding because the annualized income may push the employee into a higher bracket. If your income places you in a bracket lower than 22 percent, the flat-rate withholding overstates your actual tax liability and the excess is returned as a refund.

Expect roughly 30 to 35 percent of any bonus to go to taxes before it hits your account. The exact figure depends on your bracket, state, and whether your employer uses the flat-rate or aggregate method. If you are planning around a specific net amount from a bonus, calculate the after-tax figure first rather than assuming the gross.