How bonuses are taxed in 2026

Why your bonus check looks smaller than you expected

Your employer does not know what your total income for the year will be, so it withholds tax on a bonus using a simple rule instead of your actual tax bracket. The IRS lets employers treat a bonus as "supplemental wages" and withhold a flat 22% of it, as long as the bonus is paid separately from regular wages (or listed separately on the same check) and income tax was withheld from your regular pay this year or last year. Once your supplemental wages for the year pass $1 million, the rate on the excess is a mandatory 37%.

The other option, the aggregate method, adds the bonus to a regular paycheck and withholds as if you earned that much every pay period. That pushes the check into a higher withholding bracket for one period, which is why a bonus paid together with salary, and not listed separately on the pay stub, can see even more withheld than the flat rate.

Withholding is a prepayment, not the final bill. When you file, the bonus is simply part of your wages, taxed at the same rates as everything else you earned.

Social Security and Medicare still apply

A bonus is subject to the same payroll taxes as salary: 6.2% for Social Security on wages up to $184,500 in 2026, and 1.45% for Medicare on all wages, with another 0.9% withheld once your wages from that employer pass $200,000 in the year. If earlier pay already reached the Social Security limit, that part stops.

Bonus withholding in every state

States set their own rules. 28 states use a flat rate on bonuses, 14 (counting DC) add the bonus to regular wages and withhold on the total, and 9 have no income tax on wages. The highest flat rate is New York's 11.7%. Local income taxes, where they apply, are withheld on bonuses too.

Rates for a bonus paid separately from regular wages, for 2026. Aggregate: the bonus is added to a regular paycheck and withheld with the state's normal formula.

A $5,000 bonus in four states

For a single worker earning $75,000, paid every two weeks with a standard 2026 W-4, and the bonus paid as its own check:

California withholds 10.23% on bonuses, well above most workers' actual California tax rate, and also takes its disability insurance (SDI). New York's flat rate is 11.7%. Pennsylvania withholds its flat 3.07% income tax rate. Texas has no state income tax.

What you actually owe on a bonus

Because withholding uses one flat rate for everyone, it lands close to the right amount only for people whose top federal bracket is 22%. Comparing a return with and without a $5,000 bonus for a single filer with only wage income:

Federal income tax only. The bonus is taxed at the filer's top bracket, so the difference shows up at filing as a bigger refund or a balance due.

If you expect to owe, you can add extra withholding on Form W-4 (step 4(c)) for the rest of the year. The income tax calculator shows whether you are on track for a refund or a balance due.

Ways to keep more of a bonus

• Put part of it in your 401(k). Many plans apply your contribution percentage to bonuses, and some let you raise it for one check. Traditional contributions lower federal and most state income tax (Pennsylvania and a few local taxes still count them), though Social Security and Medicare still apply.
• Fund an HSA through payroll if you have a high-deductible health plan. Contributions through a cafeteria plan avoid federal income tax and payroll taxes; California and New Jersey still tax them.
• Check your W-4 if a large bonus will push you into a higher bracket, so you are not surprised in April.