Your bonus hits your account and a big chunk is gone. The reason is usually withholding, not a special bonus tax — and you may get some back at filing. This guide explains the two federal methods, the FICA and state pieces, and how to keep more. Estimate your own bonus with the Bonus Tax Calculator.
Two federal methods
- Flat rate: a fixed 22% federal withholding on supplemental wages up to $1 million; the excess over $1M is withheld at 37%.
- Aggregate: the bonus is added to your regular paycheck, taxed on the total at progressive rates, then the tax on the regular wages is subtracted. This often withholds more because it temporarily pushes you into a higher bracket.
Your employer chooses the method — you generally cannot.
Then add FICA and state
Bonuses are wages, so FICA applies: 6.2% Social Security up to the $184,500 wage base in 2026 plus 1.45% Medicare (and 0.9% more above $200,000 single / $250,000 joint). Many states also have a flat supplemental rate — for example California 10.23%, New York 11.70%, Illinois 4.95% — while Texas, Florida, and Washington have no state income tax. Stack these and a "22% bonus" can show 30%–40% total withholding.
How to keep more
- Boost 401(k)/403(b) or HSA contributions before the bonus is paid to cut taxable income.
- If your employer uses the aggregate method, ask whether the flat 22% method is available — it often withholds less.
- Remember over-withholding is not lost — it returns as a refund when you file.
Frequently asked questions
Why is my bonus taxed so high?
It is usually withholding, not a higher tax. The flat method withholds 22%; the aggregate method can withhold at a higher bracket. With FICA and state tax, total withholding often reaches 30%–40%. You may get a refund at filing.
What is the federal bonus tax rate for 2026?
A flat 22% on supplemental wages up to $1 million; the amount above $1M is withheld at 37%. Employers may instead use the aggregate method.
What is the difference between the flat and aggregate methods?
Flat applies a fixed 22% to the bonus. Aggregate adds the bonus to your regular pay, taxes the total at progressive rates, then subtracts the tax on the regular wages — often withholding more.
Are bonuses subject to Social Security and Medicare?
Yes: 6.2% Social Security up to $184,500 in 2026, 1.45% Medicare with no cap, plus 0.9% above $200,000 (single) or $250,000 (joint).
How can I reduce the tax on my bonus?
Increase 401(k)/403(b) or HSA contributions before the bonus, ask about the flat method, or time the bonus to a lower-income year. Over-withholding becomes a refund.
Sources: IRS Publication 15 (supplemental wages); IRS Publication 505; IRS Topic No. 751. This guide is educational and not tax advice.