How is a bonus taxed?

The IRS requires employers to withhold federal income tax on bonuses using the 22% flat supplemental rate for amounts up to $1 million.

Can I reduce bonus tax?

You can reduce the tax impact by deferring part of your bonus into a 401(k) or other pre-tax retirement account.

Bonus Tax Calculator - How Much of Your Bonus Do You Keep?

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Bonus Tax Calculator

How Bonuses Are Taxed in 2025

Bonuses are classified as supplemental wages by the IRS. The most common method is the flat rate method: a flat 22% federal withholding on bonuses up to $1 million. For amounts exceeding $1 million, the rate jumps to 37%.

Total Tax Impact

Federal tax is just one piece: Social Security (6.2%), Medicare (1.45%), and state income tax (0–13.3%) also apply. In total, expect 30% to 45% of your bonus to be withheld.

Example: $10,000 Bonus

In Texas (no state tax), you keep approximately $6,935. In California (9.3% bracket), you keep about $6,002. In New York City, you may keep only $5,650.

💡 Pro tip: Increase your 401(k) contribution for the bonus pay period. You can reduce the taxable portion significantly.