Bonus withholding: why it looks like a 22% tax

Ask anyone what happened to their bonus and you'll hear "they took 22%" or "it got taxed at 40%". Neither describes the tax. Both describe withholding — the prepayment payroll takes out on the day the bonus is paid.

The rule: bonuses are supplemental wages

IRS Publication 15 calls a bonus, commission, severance or back pay supplemental wages, as opposed to your regular salary or hourly pay. The distinction exists only for withholding. On your Form 1040, a dollar of bonus is the same as a dollar of salary: both are wages on your W-2, taxed at your ordinary rates.

For withholding, the employer has two methods to choose from.

Method 1: the flat rate (percentage method)

If the bonus is paid separately from regular wages, or shown as a separate line, the employer can withhold federal income tax at a flat 22%. For tax year 2026 that rate is unchanged, per Publication 15. Once your supplemental wages from one employer pass $1 million in a calendar year, the excess must be withheld at 37%, no option.

This method ignores your W-4. The extra withholding you set in Step 4(c), your dependents, your filing status: none of it applies to the flat-rate calculation.

Method 2: the aggregate method

The employer adds the bonus to a regular paycheck, calculates withholding on the combined total as if that were your normal pay every period, and then subtracts what was already withheld on the regular part.

Because the tables annualize each paycheck, a combined check looks like a much higher salary. A $2,240.00 check with a $5,000 bonus on top is treated, for that one period, as if you earned it every two weeks all year. That's where the "they took 40%" stories come from.

	Flat rate	Aggregate
Uses your W-4	No	Yes
Federal rate on the bonus	22% (37% over $1M)	Whatever the tables produce for the combined check
Predictable	Yes	Not without running the tables
Common when	Bonus paid on its own check or separate line	Bonus folded into a regular paycheck

What does not change: FICA and state

Whichever method is used, the bonus is wages for Social Security (6.2%) and Medicare (1.45%). On our $250.00 stub bonus that's $15.50 and $3.63. Social Security stops if the bonus pushes your year's wages past the wage base ($184,500 for 2026, per the SSA).

States set their own rules. Some have a flat supplemental rate, others use the aggregate approach, and a few states don't tax wages at all. Your state's withholding guide spells it out.

Working the $250.00 on our stub

Assume it was paid on the regular check but flagged as a separate line, so the employer may apply the flat rate:

1. Federal at 22%: $250.00 × 0.22 = $55.00
2. Social Security: $250.00 × 0.062 = $15.50
3. Medicare: $250.00 × 0.0145 = $3.63 (3.625, rounded)
4. Federal + FICA = $74.13, before state tax

So $250.00 of bonus lands as roughly $175.87, less your state's share. That's about 70% before state — not because the bonus is taxed at 30%, but because three prepayments were taken at once.

Why the 22% often comes back

The flat rate is a single number for everybody. Your actual top rate might be 10%, 12%, 22%, 24% or higher.

• Top bracket below 22% — too much was withheld on the bonus. The difference comes back when you file.
• Top bracket at 22% — the withholding is close to right.
• Top bracket above 22% — too little was withheld. The difference is due at filing, and a large bonus can create a balance owed you didn't expect.

The comparison table below runs a $1,000 bonus for someone whose whole bonus sits in the 12% bracket.

What you can do

• Before the bonus: ask payroll which method they use and whether the bonus will be its own check. The answer tells you what to expect on the deposit.
• If you're in a bracket above 22%: add a temporary amount to W-4 Step 4(c) for a few checks after a large bonus, then remove it.
• If you're well below 22%: there's nothing to do on the bonus itself; the excess is credited when you file. Don't lower your regular withholding to compensate unless you've run the IRS Tax Withholding Estimator.
• Retirement contributions: check whether your 401(k) election applies to bonuses. Many plans let you set a separate percentage. A traditional deferral lowers federal income tax wages but not FICA.

Severance is supplemental wages too, and follows the same two methods.