Free Bonus Tax Calculator — 22% Flat vs Aggregate

Your year-end bonus is considered supplemental wages by the IRS, and there are two ways your employer can tax it. The flat rate method withholds 22% federally for bonuses under $1 million. That's simple and predictable — a $5,000 bonus gets $1,100 withheld for federal tax. The aggregate method combines your bonus with your regular paycheck and calculates withholding as if it's all regular income, which can push you into a higher withholding bracket temporarily.

Here's where it gets interesting: the 22% flat rate is just the withholding, not your actual tax. If your total income puts you in the 24% or 32% bracket, you'll owe the difference when you file. On a $10,000 bonus, 22% withholding is $2,200. If your actual rate is 32%, you owe $3,200 — that's an extra $1,000 come tax time. On the other hand, if you're in the 12% bracket, you'll get a refund of the difference. The withholding is a prepayment, not the final bill.

For bonuses over $1 million, the mandatory federal withholding rate jumps to 37%. Yes, 37% off the top for anything above that first million. Plus FICA at 7.65% on the full amount, plus state taxes. A $2 million bonus in California could see total withholding above 50%. That's why compensation packages for executives often include tax gross-ups — the company pays the tax on the tax.

State taxes on bonuses follow the same rules as regular income. In a zero-income-tax state like Texas or Florida, you only pay federal withholding and FICA on your bonus. In California, add up to 13.3% state tax. The difference between receiving a $10,000 bonus in Texas vs California is roughly $1,000 in state tax alone. Location matters.