Why Is My Bonus Taxed So High?
Your bonus isn't actually taxed at a higher rate—it just looks that way because of how withholding works. Here's what's really happening and what you can do about it.
✓ Withholding ≠ actual tax rate
✓ Understand the aggregate method trap
✓ See your real take-home →
Bonus pay tax calculator · Percentage method
Gross bonus
$5,000.00
Federal withholding (22%)
−$1,100.00
State withholding (6.60%)
−$330.00
Social Security (6.2%)
−$310.00
Medicare (1.45%)
−$72.50
Total withholding
−$1,812.50
36.25% effective
Net bonus (take-home)
$3,187.50
The Short Answer
Your bonus is not taxed at a higher rate than your regular income. What you're seeing is higher withholding—money your employer sends to the IRS as an estimate. The actual tax is determined when you file your return.
Why Withholding Is Higher
- Aggregate method: Your employer adds the bonus to your regular paycheck and withholds as if you earned that amount every pay period. A $5,000 bonus on a $3,000 paycheck = withholding as if you earn $8,000/period → much higher bracket.
- Percentage method (flat 22%): Even at a flat 22%, many workers in the 10% or 12% bracket feel over-withheld. But workers in the 24%+ bracket actually benefit.
- FICA on top: An additional 7.65% (6.2% Social Security + 1.45% Medicare) is withheld on top of income tax. This is the same as your regular pay but it adds up fast on a lump sum.
Example: $5,000 Bonus
Federal (22% flat): $1,100
Social Security (6.2%): $310
Medicare (1.45%): $72.50
State tax (varies): ~$250 (5% example)
Take-home: ~$3,267.50 (34.7% total withholding)
What You Can Do
Ask your employer to use the percentage method (flat 22%) rather than the aggregate method. You can also adjust your W-4 withholding allowances for the remainder of the year to reduce regular paycheck withholding and recover the difference sooner.