Are bonuses taxed differently?

Bonuses are taxed like any other wages when you file your return, but they are often withheld differently. Many employers withhold a flat 22% federal rate on a bonus paid on its own. That can make a bonus check look heavily taxed, even though the final tax is the same as on regular pay.

On a $1,000 bonus under the flat method, $220 goes to federal income tax, $62 to Social Security and $14.50 to Medicare. That leaves $703.50 in a state with no income tax. Bonus pay over $1 million in a year is withheld at 37%. Other employers use the aggregate method, which adds the bonus to a regular paycheck.

Many states have their own bonus rate, such as 10.23% in California. Run your numbers in the bonus tax calculator, and see supplemental wages for the IRS rules.