Your bonus is not taxed at a higher rate
A bonus is ordinary income. It is taxed at the same rates as your salary, in the same brackets, on the same return. What differs is withholding: the amount your employer sends to the IRS on your behalf before you see the money.
Payroll systems are built for regular paychecks, so a bonus doesn't fit them well. The IRS gives employers two ways to handle it, and both can land far from the tax the bonus actually adds. If too much is withheld, you get the excess back when you file. If too little is withheld, the gap is due with your return unless other withholding covers it.
The two methods, and why you don't choose
Your employer picks the method. How the bonus is paid limits the choice.
Flat percentage method
A straight 22% comes out, regardless of your W-4, your salary, or your bracket. The employer can use it when the bonus is paid separately, or paid with regular wages but listed as a separate amount, provided income tax was withheld from your regular wages this year or last. It is simple for payroll, and it is what most people see on a separate bonus check.
Aggregate method
Payroll adds the bonus to one regular paycheck and withholds on the total as though it were a normal paycheck, then subtracts what your regular pay alone would have had withheld. The employer must use this method when a bonus is folded into a paycheck without being separately identified.
The catch is that withholding tables assume every paycheck looks like this one. Take a $60,000 salary paid every two weeks and a $10,000 bonus. On the bonus paycheck, payroll treats you as earning $320,000 a year and withholds $2,697 from the bonus, about 27%. The flat method would take $2,200. For a single filer with no other income, the bonus actually adds about $1,550 to the year's federal income tax. Under either method, the extra withholding comes back as a refund.
Neither method changes what you owe. They only change when you settle it.
Bonuses above $1 million
Once your supplemental wages for the calendar year pass $1 million, the amount above that line must be withheld at 37%, the top individual rate, whatever your W-4 says. Unlike the 22%, this rate is mandatory. The threshold counts all supplemental wages paid during the year, including those from businesses under common control with your employer. If you received $900,000 in earlier bonuses and then a $200,000 bonus, $100,000 of it can be withheld at 22% and the other $100,000 must be withheld at 37%.
Payroll taxes still apply
Beyond income tax withholding, a bonus carries the same payroll taxes as any other wages:
- Social Security, 6.2%, but only up to the annual wage base ($184,500 for 2026). If your year-to-date pay has already passed it, none comes out of the bonus at all. That is why a December bonus for a high earner can be noticeably larger than the same bonus paid in March.
- Medicare, 1.45%, on every dollar, with no cap.
- Additional Medicare, 0.9%, on wages above $200,000 for the year. Your employer applies the $200,000 threshold regardless of your filing status. If you file jointly, your actual threshold is $250,000, and any over-withholding is credited on your return.
Frequently asked questions
Are bonuses taxed at a higher rate than regular pay?
No. A bonus is ordinary income taxed at exactly the same rates as your salary. What differs is withholding, not taxation. Employers may withhold a flat 22% from a bonus identified separately from regular pay, and that is often more than the bonus actually adds to your tax, so it feels like a higher rate. Any excess comes back when you file.
Why was 22% withheld from my bonus?
Because 22% is the optional flat withholding rate the IRS sets for supplemental wages paid separately from regular pay. It is a withholding convention, not a tax bracket. If your marginal rate is 12%, too much was withheld and you get it back. If your marginal rate is 32%, too little was withheld, and the shortfall is due when you file unless other withholding covers it.
What is the difference between the flat rate and aggregate methods?
The flat method withholds a straight 22%, and employers can use it when the bonus is identified separately from regular pay. The aggregate method adds the bonus to one regular paycheck and withholds on the total as if you earned that much every pay period. Because of that annualizing, a bonus that is large next to your normal paycheck often has more than 22% withheld under the aggregate method, even when your real marginal rate is lower. Your employer chooses the method, not you.
What happens to bonuses over $1 million?
Once your supplemental wages for the year exceed $1 million, the portion above that threshold must be withheld at 37%, the highest income tax rate, regardless of your W-4. This rate is mandatory rather than optional, and the threshold is cumulative across the calendar year rather than per payment.
Does Social Security come out of a bonus?
Yes, unless you have already hit the annual wage base. Social Security is 6.2% on wages up to $184,500 in 2026; once your year-to-date wages pass that, no more is withheld from anything, including a bonus. Medicare's 1.45% has no cap and always applies.
Can I avoid tax on a bonus by putting it in my 401(k)?
Deferring a bonus into a traditional 401(k) removes it from current taxable income, though Social Security and Medicare are still withheld on it. It defers income tax rather than avoiding it, since withdrawals are taxed later. Whether your employer allows bonus deferral is a plan-specific question.