How bonuses are taxed
The IRS calls a bonus a supplemental wage, along with commissions, overtime paid separately, severance and back pay. Your employer withholds federal tax on it one of two ways.
- The percentage method takes a flat 22% of the bonus. Supplemental pay over $1,000,000 in a year is always withheld at 37%.
- The aggregate method adds the bonus to a regular paycheck and applies the normal withholding tables to the total.
Social Security (6.2% up to the yearly wage base) and Medicare (1.45%) apply either way. Withholding is only a prepayment. On your tax return the bonus is ordinary income, so the final tax is the same whichever method your employer used.
Bonus tax rates by state
Some states set a flat rate for bonuses and others use regular withholding. The last two columns show a $5,000 bonus, including state payroll deductions such as disability insurance, with the federal flat rate, for a single filer paid $2,500 every two weeks.
| State | How the state withholds on bonuses | State taxes and deductions on $5,000 | Take-home bonus |
|---|---|---|---|
| Alabama | 5% flat | $250.00 | $3,267.50 |
| Alaska | No state income tax | $25.00 | $3,492.50 |
| Arizona | 2% flat | $100.00 | $3,417.50 |
| Arkansas | 3.7% flat | $185.00 | $3,332.50 |
| California | 10.23% flat on bonuses | $576.50 | $2,941.00 |
| Colorado | 4.4% flat | $242.00 | $3,275.50 |
| Connecticut | Regular withholding (aggregate) | $335.58 | $3,181.92 |
| Delaware | Regular withholding (aggregate) | $350.00 | $3,167.50 |
| District of Columbia | Regular withholding (aggregate) | $417.31 | $3,100.19 |
| Florida | No state income tax | $0.00 | $3,517.50 |
| Georgia | 4.99% flat | $249.50 | $3,268.00 |
| Hawaii | Regular withholding (aggregate) | $413.48 | $3,104.02 |
| Idaho | 5.3% flat | $265.00 | $3,252.50 |
| Illinois | 4.95% flat | $247.50 | $3,270.00 |
| Indiana | 2.95% flat | $147.50 | $3,370.00 |
| Iowa | 3.8% flat | $190.00 | $3,327.50 |
| Kansas | 5% flat | $250.00 | $3,267.50 |
| Kentucky | 3.5% flat | $175.00 | $3,342.50 |
| Louisiana | Regular withholding (aggregate) | $150.00 | $3,367.50 |
| Maine | 5% flat | $275.00 | $3,242.50 |
| Maryland | 6.5% flat | $325.00 | $3,192.50 |
| Massachusetts | 5% flat | $273.00 | $3,244.50 |
| Michigan | 4.25% flat | $212.50 | $3,305.00 |
| Minnesota | 6.25% flat | $334.50 | $3,183.00 |
| Mississippi | Regular withholding (aggregate) | $200.00 | $3,317.50 |
| Missouri | 4.7% flat | $235.00 | $3,282.50 |
| Montana | 5% flat | $250.00 | $3,267.50 |
| Nebraska | 3.5% flat | $175.00 | $3,342.50 |
| Nevada | No state income tax | $0.00 | $3,517.50 |
| New Hampshire | No state income tax | $0.00 | $3,517.50 |
| New Jersey | Regular withholding (aggregate) | $357.18 | $3,160.33 |
| New Mexico | 5.9% flat | $295.00 | $3,222.50 |
| New York | 11.7% flat | $631.60 | $2,885.90 |
| North Carolina | 4.09% flat | $204.50 | $3,313.00 |
| North Dakota | 1.5% flat | $75.00 | $3,442.50 |
| Ohio | 2.75% flat | $137.50 | $3,380.00 |
| Oklahoma | 4.5% flat | $225.00 | $3,292.50 |
| Oregon | 8% flat | $435.00 | $3,082.50 |
| Pennsylvania | 3.07% flat | $157.00 | $3,360.50 |
| Rhode Island | 5.99% flat | $354.50 | $3,163.00 |
| South Carolina | Regular withholding (aggregate) | $276.91 | $3,240.59 |
| South Dakota | No state income tax | $0.00 | $3,517.50 |
| Tennessee | No state income tax | $0.00 | $3,517.50 |
| Texas | No state income tax | $0.00 | $3,517.50 |
| Utah | Regular withholding (aggregate) | $236.26 | $3,281.24 |
| Vermont | 3% of federal withholding | $330.00 | $3,187.50 |
| Virginia | 5.75% flat | $287.50 | $3,230.00 |
| Washington | No state income tax | $69.36 | $3,448.14 |
| West Virginia | Regular withholding (aggregate) | $229.00 | $3,288.50 |
| Wisconsin | Regular withholding (aggregate) | $282.48 | $3,235.02 |
| Wyoming | No state income tax | $0.00 | $3,517.50 |
How to keep more of your bonus
- Ask whether your 401(k) takes contributions from bonuses. That part skips federal income tax now.
- If you are under-withheld for the year, the flat 22% may be exactly right. If you usually get a refund, the extra comes back when you file.
- Your W-4 does not change the flat rate, but it does change regular paychecks. Use the paycheck calculator to check the rest of your year.
Paying a bonus and want the employee to receive an exact amount? The gross-up calculator works backward from take-home pay. For commission or tips that come with every check, the hourly paycheck calculator and salary paycheck calculator include them as regular pay.