Bonus Tax Calculator 2026
22% federal supplemental, state tax, FICA, and take-home
Last updated: November 2025 · Sources: IRS Pub. 15, IRC §3402(g), SSA 2026
Bonus Details
Used for state aggregate calculation and FICA wage-base tracking.
Bonuses already received this year. Only matters if approaching $1M.
Withholding Breakdown
Understanding 2026 Bonus Taxation
Federal Supplemental Withholding
IRC §3402(g) treats bonuses, commissions, severance, retroactive pay, prizes, awards, and other "supplemental wages" differently from regular wages. Employers have two options: (1) Percentage method at a flat 22% (the IRS-set rate, currently 22% since TCJA), or 37% on cumulative supplemental wages above $1M. (2) Aggregate method: combine bonus with regular pay-period wages, withhold at normal table rates. The percentage method is simpler and is what most large payroll providers (ADP, Gusto, Paychex) use by default.
The $1M Rule
If cumulative supplemental wages paid to an employee in a calendar year exceed $1,000,000, the employer MUST withhold federal tax at 37% (the top marginal rate) on every dollar above $1M, regardless of which method was used below $1M. This rule (IRC §3402(g)(1)(A)(ii)) was originally enacted in 2002 to combat under-withholding on executive bonuses, golden parachutes, and large stock-option payouts. The 37% is mandatory withholding, not the final tax; reconciled at filing.
State Withholding Varies Widely
Each state sets its own supplemental wage rules. Notable 2026 supplemental flat rates: CA 10.23% (bonuses), 6.6% (commissions); NY 11.7%; GA 5.39%; NC 4.6%; MA 5.0%; CO 4.4%. Some states (AZ, IL, IN, MI, NC, PA) use their flat income-tax rate. No-income-tax states (AK, FL, NV, NH, SD, TN, TX, WA, WY) withhold $0 from bonuses. Florida, Texas, Tennessee, and Washington see the largest bonus take-home pay because no state tax.
FICA on Bonuses
Bonuses are subject to FICA just like regular wages: 6.2% Social Security on combined YTD wages up to the 2026 wage base of $184,500, and 1.45% Medicare on the full bonus (no cap). High earners also face an extra 0.9% Additional Medicare Tax on combined YTD wages above $200,000 single / $250,000 MFJ (IRC §3101(b)(2)). Employers withhold the 0.9% starting when an employee's YTD wages from THAT employer cross $200,000, regardless of filing status.
Grossing Up a Bonus
"Grossing up" means paying a higher bonus so the employee receives a specific NET amount after taxes. Common for relocation, signing, and severance. Formula: gross = net / (1 − total withholding rate). Example: to give $10,000 net at 22% federal + 6.2% SS + 1.45% Medicare + 5% state = 34.65% total, pay $10,000 / 0.6535 = $15,302 gross. The employer absorbs the tax cost. Note: this uses WITHHOLDING rates, not the employee's true marginal rate, so the employee may still owe or get refunded at filing time.
Reduce Bonus Tax with Retirement Contributions
Pretax 401(k) deferrals from a bonus reduce federal income tax withholding (and most state withholding) but do NOT reduce FICA. If you haven't maxed your $24,500 employee deferral for 2026, ask your employer to defer a portion of the bonus directly. HSA contributions ($4,400 self / $8,750 family) avoid BOTH income tax AND FICA, so they're even more powerful for bonus shielding. Some employers also let bonuses fund Deferred Compensation plans (NQDC) for true tax deferral.
When Bonuses Are Taxed
Bonuses follow the same tax-year rules as regular wages: they're taxed in the year received. A bonus paid January 15, 2027 for 2026 performance is 2027 income, not 2026. This timing matters for year-end planning, if you can defer a January bonus to push it into the next year (or accelerate a pending bonus into the current year), you may smooth your tax bracket across years. Some employers offer the choice as part of their compensation plan.
Frequently Asked Questions
22% method vs aggregate method?
Percentage method: 22% flat federal withholding (37% over $1M YTD). Aggregate method: combine bonus with regular pay-period wages and use normal tables. Aggregate matches your real marginal bracket more closely; percentage is simpler.
What if my bonus is over $1 million?
IRC §3402(g)(1)(A)(ii) requires 37% mandatory federal withholding on cumulative supplemental wages above $1M. This is withholding only; your final tax owed depends on your true marginal bracket at filing.
Why does my state matter?
States vary from 0% (TX, FL, NV) to over 11% (NY, NJ) on bonuses. Some use flat supplemental rates, others use aggregate. Your state choice can change the take-home by thousands of dollars on a large bonus.
What is "grossing up" a bonus?
Paying a higher bonus so the employee nets a target after-tax amount. Formula: gross = net / (1 − total withholding rate). Common for relocation, signing, and severance bonuses.
Are bonuses really taxed higher?
No, bonuses are taxed at your normal marginal bracket. The 22% is just WITHHOLDING; your actual tax is calculated on Form 1040 with all income combined. If your bracket is below 22% you get a refund; above 22% you may owe.
Can I shield a bonus with 401(k)?
Yes, pretax 401(k) deferrals reduce federal and state income tax on the bonus (but not FICA). Ask your employer to defer a chunk directly. HSA contributions ($4,400 self / $8,750 family) avoid BOTH income tax AND FICA, even more powerful.