Paycheck guides
The 22% you see disappear from a bonus is a withholding rule, not a tax rate. For most people it is too much, and the difference comes back in April.
Almost everyone who gets a bonus has the same reaction: the number on the paystub is nowhere near the number they were promised. A $5,000 bonus arrives as something closer to $3,400, and the natural conclusion is that bonuses are taxed at a punishing rate.
They are not. Bonuses are taxed at exactly the same rates as the rest of your income. What is different is withholding — how much your employer sends to the IRS on your behalf before the money reaches you. Those are two different things, and confusing them is the single most common misunderstanding about how pay works.
Your actual federal income tax is calculated once, in April, on your total income for the year. Everything your employer withheld during the year is a series of estimated prepayments against that final bill. If the prepayments came to more than the bill, you get a refund. If they came to less, you write a cheque.
Bonuses get their own withholding rule because they do not fit the normal calculation. Regular payroll withholding works by annualising: your employer takes your $2,500 semi-monthly cheque, assumes you will get 24 of them, and withholds as though you earn $60,000. A one-off $5,000 bonus breaks that logic entirely — annualising it would imply you earn $120,000 from bonuses alone.
The IRS solves this by treating bonuses as supplemental wages, a category that also covers commissions, overtime paid separately, severance, back pay, awards and the taxable value of vested stock. Employers are allowed to withhold on supplemental wages at a flat percentage, and for 2026 that percentage is 22%.
From IRS Publication 15 (Circular E) for 2026: the withholding rate on supplemental wages is 22%, rising to 37% on supplemental wages paid to one employee that exceed $1 million in a calendar year.
That 37% tier is not a penalty either — it is simply the top marginal rate, applied on the reasonable assumption that someone receiving over a million dollars in bonuses is already in the top bracket.
The 22% covers federal income tax only. Social Security and Medicare come out on top of it, at the same rates as any other wages:
So a bonus with nothing else going on loses 22% + 6.2% + 1.45% = 29.65% to federal withholding and FICA before your state takes its share. On a $5,000 bonus in a state with no income tax, that is $1,482.50 gone and $3,517.50 landing in your account. Add a state with a 5% supplemental rate and you are down to roughly $3,267.
The flat rate is optional. Employers may instead use the aggregate method: add the bonus to your regular cheque, withhold as though that combined amount were your normal pay, then subtract what you would have withheld on the regular pay alone.
The aggregate method usually withholds more than 22%, because lumping a bonus into one pay period pushes the annualised figure into higher brackets. This is why two colleagues with identical bonuses at different companies can see visibly different net amounts. Neither employer is wrong; they picked different permitted methods.
Whether 22% is too much or too little depends on your marginal bracket. Using the 2026 brackets for a single filer taking the $16,100 standard deduction:
| Salary | Your top bracket | Flat 22% is… |
|---|---|---|
| $45,000 | 12% | Too much — refunded in April |
| $70,000 | 22% | About right |
| $120,000 | 24% | Slightly short |
| $225,000 | 32% | Well short — plan for it |
A worker earning $45,000 who receives a $5,000 bonus has $1,100 withheld against a real marginal cost of about $600. That $500 difference is not lost. It is an interest-free loan to the Treasury that comes back as a larger refund.
The reverse case matters more. If you earn $225,000 and take a $40,000 bonus, 22% withholds $8,800 where your marginal rate implies roughly $12,800. The $4,000 gap will show up as a balance due, and if it is large enough it can trigger an underpayment penalty.
A bonus is ordinary income taxed at ordinary rates. The 22% is a blunt prepayment rule that exists because payroll systems cannot know what your year will look like. For most earners it is too blunt in their favour, and the correction arrives with the refund.
Sources: IRS Publication 15 (Circular E), Employer’s Tax Guide for 2026, supplemental wage withholding; IRS Revenue Procedure 2025-32 for 2026 brackets and the standard deduction; Social Security Administration contribution and benefit base for 2026; IRS Notice IR-2025-111 for retirement plan limits.
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