Bonus Tax Rate: What Your Bonus Is Really Worth After Taxes
Bonuses are withheld at a flat 22% federal rate — plus 7.65% FICA — so a $10,000 bonus pays out about $7,035 on the spot. But withholding is not the same as the final tax: depending on your total income, the true cost can be anywhere from 12% to 37%, and the difference settles up on your tax return. Here is how the two systems work, why they diverge, and what real bonuses net at real salaries.
The quick answer: withholding vs. reality
The IRS treats bonuses as supplemental wages and lets employers withhold at a flat 22% — no W-4, no bracket math, one rate for everyone from the mailroom to the boardroom. FICA takes its standard 7.65% on top. But when you file your return, the bonus is just income: it lands in whatever brackets your total salary reaches, and the 22% that was withheld gets trued up. Over-withholding produces a refund; under-withholding produces a bill.
| Bonus | Federal withholding (22%) | FICA (7.65%) | Paid out now |
|---|---|---|---|
| $1,000 | −$220 | −$77 | $704 |
| $5,000 | −$1,100 | −$383 | $3,518 |
| $10,000 | −$2,200 | −$765 | $7,035 |
| $25,000 | −$5,500 | −$1,913 | $17,588 |
These payout figures assume the 22% flat rate and full FICA, and no state withholding. Most states that levy income tax also apply a supplemental method — often the same flat percentage as the state’s top rate, or withholding at the regular rate as if the bonus were annualized. The examples below add state tax where it applies.
Why 22% can be wrong in both directions
The flat rate is a convenience, not a truth. Whether it over- or under-taxes your bonus depends on where your salary already sits:
| Your salary (single filer) | True federal tax on a $10,000 bonus | Effective rate on the bonus | vs. 22% withheld |
|---|---|---|---|
| $40,000 | $1,200 | 12.0% | Over-withheld $1,000 → refund |
| $60,000 | $1,550 | 15.5% | Over-withheld $650 → refund |
| $80,000 | $2,200 | 22.0% | Exactly right |
| $120,000 | $2,364 | 23.6% | Under-withheld → owe at filing |
| $200,000 | $2,400 | 24.0% | Under-withheld → owe at filing |
The pattern: below roughly $80,000 of taxable-equivalent income, a $10,000 bonus falls mostly into the 12% bracket, and 22% withholding grabs too much. Above it, the bonus starts filling the 22% bracket itself, then spills into 24% for salaries over about $105,700 of taxable income. The break-even sits near $80,000 because that is where the standard deduction plus the lower brackets have just been used up by salary.
What a $10,000 bonus really nets, salary by salary
Combining true federal tax, FICA, and state tax on top of existing salary (single filer, no pre-tax contributions):
| Scenario | True net on $10,000 | vs. flat 22% payout |
|---|---|---|
| $40,000 salary, Texas | $8,035 | +$1,000 at filing |
| $75,000 salary, Texas | $7,035 | Exactly matches |
| $100,000 salary, Texas | $7,035 | Exactly matches |
| $150,000 salary, Texas | $6,835 | −$200 at filing |
| $100,000 salary, California | $6,105 | −$930 at filing (state) |
Notice that FICA never varies — every bonus dollar costs 7.65% until year-to-date wages pass the $184,500 Social Security cap, after which only the 1.45% Medicare share (plus 0.9% above $200,000) applies. A $10,000 bonus for someone who has already maxed out Social Security for the year nets an extra $620 over the standard case.
The two withholding methods employers can use
Employers choose between two IRS-sanctioned approaches, and the difference shows up in the paycheck, not on the return:
Flat 22% (percentage method). The standard for most employers: withhold 22% of the bonus, done. Simple, uniform, and exactly right for workers near $80,000 of income — the minority case.
Aggregate method. Some employers add the bonus to your most recent regular paycheck and withhold on the combined amount at your W-4 rates. If your regular withholding is tuned to your salary, the bonus dollars get withholding at your marginal rate — more accurate, but wildly variable: a bonus paid in a week with heavy overtime can see a bigger combined check push part of itself into a higher withholding band.
Either way, the year-end tax bill is identical. Method only changes the timing and the size of the refund-or-balance adjustment.
Three things that change the final number
401(k) contributions. Bonus dollars can be diverted into a traditional 401(k) before withholding, which skips both the 22% and income tax entirely — FICA still applies. An employee who directs an entire $10,000 bonus into the plan keeps $9,235 inside the account ($10,000 minus FICA) instead of $7,035 in cash. Watch the annual contribution cap if your salary is high enough that the bonus lands near it.
The Social Security cap. Bonuses paid after your cumulative wages pass $184,500 owe no Social Security tax — just Medicare. On a $10,000 late-year bonus that is a $620 swing, which is one reason high earners' bonuses feel bigger than the 22% math predicts.
State supplemental rates. States with income tax handle bonuses their own way — some apply the top marginal rate flat, some annualize. California, for example, withholds bonuses at 10.23% for state purposes; the examples in the table above use the engine’s standard calculation, so treat state lines as approximations and check your state’s supplemental schedule.
Bonus vs. raise: the planning question
A $10,000 one-time bonus and a $10,000 raise are not the same money. The bonus pays $7,035 once (at the 22% break-even salary) and disappears next year; the raise pays roughly $6,900 more every year, compounds into future raises and 401(k) matches, and raises the baseline for Social Security credits. Employers often prefer bonuses precisely because they cost less over time — which is exactly why a "bonus-sized" counteroffer is worth less than the same number as salary.