The 22% supplemental withholding rule
The IRS gives employers two ways to withhold on supplemental wages like bonuses. The most common is the percentage method: a flat 22% federal income tax on the bonus, no W-4 tables involved. The rate applies to the entire bonus up to $1 million of supplemental wages in the year; anything above that threshold is withheld at 37%. The 22% is pure withholding — it is not your tax rate on the bonus.
The aggregate method (bonus paid with regular wages)
If your employer adds the bonus to a regular paycheck without separating it, the combined amount must be withheld as if it were all regular wages under your W-4. Depending on your income, that can withhold more or less than the flat 22% would. Most payroll systems avoid this by running bonuses as separate supplemental payments.
FICA: the part nobody exempts
- Social Security: 6.2% of wages up to the annual wage base ($184,500 for 2026) — once you've hit the base for the year, no further SS tax is due, which is why late-year bonuses can dodge it.
- Medicare: 1.45% of all wages with no cap, plus an extra 0.9% on wages above $200,000 for singles ($250,000 joint, employer-only withholding rule).
- No bonus exemption exists for FICA — the 2026 overtime and tips deductions do not touch it either.
State tax on bonuses
Nine states levy no wage income tax (AK, FL, NV, NH, SD, TN, TX, WA, WY), so the only slices off a bonus there are federal. States with flat income taxes typically apply their flat rate to supplemental wages; California publishes a dedicated 10.23% supplemental rate and New York withholds 9.65%. In progressive-tax states, employers either use a flat estimate or roll the bonus into regular withholding. Your state list and rates appear in our bonus tax calculator.
Why you often get some of it back
At filing, your bonus is ordinary income — added to your salary and taxed at your actual brackets. If your total income puts your effective federal rate at 15%, the 7-point gap between 15% and the 22% withheld becomes refund. That's also why a bonus in a high-earning year (near a bracket edge) can genuinely cost more tax than the same bonus in a low year: the withholding is fixed, the liability isn't.
Legitimate ways to shrink the tax
- 401(k)/403(b) deferrals taken from the bonus check reduce taxable wages dollar-for-dollar (some plans require an election before payroll runs).
- HSA and FSA contributions through payroll do the same.
- If withholding clearly overshoots, a mid-year W-4 adjustment spreads the correction over remaining checks instead of waiting for a refund.
- Timing: if the employer will defer a bonus to January, the tax moves with it — occasionally useful near bracket edges.