Bonus Tax Rate: How Are Bonuses Taxed in 2025 and 2026?

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If you’ve ever received a bonus and thought, “Why was my bonus taxed so much?” you’re not alone.

Here’s the key fact: There is no separate bonus tax rate. Bonuses are taxed as ordinary income under federal law, just like your salary, according to the Internal Revenue Service.

What is different is how employers withhold taxes from bonuses. And withholding is not the same as the tax you ultimately owe.

Bonus Tax Rate: At a Glance

Question	Short Answer
Are bonuses taxed differently?	No — taxed as ordinary income
Why is 22% withheld?	Federal supplemental wage withholding rule
High-income rate?	37% over $1 million supplemental wages
Is withholding your real tax rate?	No
Can you get money back?	Yes, if over-withheld

Why Bonuses Seem Taxed Differently

Bonuses are considered supplemental wages by the Internal Revenue Service. Supplemental wages include:

• Commissions
• Overtime pay
• Severance
• Awards and prizes
• Retroactive pay
• Reported tips

Under IRS rules, supplemental wages may be subject to special withholding methods, even though they are taxed as ordinary income when you file your return.

Current Federal Bonus Withholding Rates

According to IRS supplemental wage guidance:

Flat Withholding Method

If your employer pays your bonus separately from regular wages:

• 22% federal withholding if total supplemental wages are $1 million or less in the calendar year
• 37% if supplemental wages exceed $1 million

These rates come directly from IRS Publication 15 and IRS withholding tables. This 22% withholding often makes employees believe bonuses are taxed higher, but it’s just an upfront estimate.

Aggregate Method

If your bonus is included with regular wages on the same paycheck, your employer may use the aggregate method. Under this method:

1. Your employer combines bonus and regular wages.
2. Calculates withholding as if that combined amount is your regular paycheck.
3. Withholds accordingly.

This can result in higher withholding because it temporarily assumes you earn that larger amount every pay period. IRS guidance explains both methods in Publication 15.

Bonus Withholding vs. Your Actual Tax Bill

The IRS makes clear that supplemental wages are taxed as ordinary income. Your actual tax is calculated using the federal income tax brackets published annually by the Internal Revenue Service.

For 2025, federal tax brackets range from 10% to 37% depending on filing status and income level. Withholding is simply a prepayment.

• If too much is withheld = you get a refund.
• If too little is withheld = you pay the difference.

How Bonuses Affect Your Tax Bracket

Many people believe a bonus pushes all their income into a higher bracket. That’s incorrect. The federal tax system is marginal, meaning:

• Only the income inside each bracket is taxed at that bracket’s rate.

For example, according to the IRS, the 2025 tax brackets for a single filer:

Only income above each threshold is taxed at the higher rate.

Example: $25,000 Bonus Scenario

Assume:

• Single filer
• $80,000 salary
• $25,000 bonus
• Total income: $105,000

Federal withholding on bonus (22% flat method):$25,000 ?– 22% = $5,500

However, because part of the bonus may fall into the 24% bracket, actual tax owed could be slightly higher than 22% on a portion of it. This difference is reconciled when you file.

Payroll Taxes Also Apply

In addition to federal income tax, bonuses are subject to:

• Social Security tax (6.2%) up to the annual wage base
• Medicare tax (1.45%) with no income cap

These rates are established under the Social Security Act and IRS employment tax guidance. That’s why your bonus paycheck may show 30% or more total deductions.

State Taxes on Bonuses

States also tax bonuses as ordinary income, but some use flat supplemental withholding rates. For example:

• California uses a flat supplemental wage withholding rate (published by the California Franchise Tax Board).
• New York allows either flat or aggregate withholding for supplemental wages (NY Department of Taxation guidance).

State withholding doesn’t necessarily equal your final state tax owed.

Can You Reduce Taxes on a Bonus?

You cannot reduce taxes on the bonus separately. However, you can reduce overall taxable income by:

• Increasing 401(k) contributions (IRS retirement plan rules)
• Contributing to a traditional IRA
• Contributing to an HSA
• Timing income between tax years

Reducing taxable income lowers total tax liability.

Final Take To Go

There’s no special bonus tax rate. Bonuses are taxed as ordinary income under IRS rules. The 22% rate many employees see is simply a federal supplemental withholding rule — not your true tax rate.

Understanding the difference between withholding and actual tax helps you plan better and avoid surprises at filing time.

Angela Mae and Caitlyn Moorhead contributed to the reporting for this article.

Data is accurate as of Feb. 12, 2026, and is subject to change.

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