Bonuses in the United States are taxed as supplemental wages with a federal flat withholding rate of 22% for bonuses up to $1 million. If bonus payments exceed $1 million in a tax year, the amount over $1 million is taxed at a higher flat withholding rate of 37%. In addition to federal withholding, bonuses are also subject to Social Security tax (6.2% up to the wage base limit of $176,100 in 2025) and Medicare tax (1.45% plus an additional 0.9% on wages over $200,000 for single filers). State and local taxes may also apply depending on the employee’s location. Employers generally use two methods for withholding taxes on bonuses:
- The percentage method , applying the flat 22% rate for bonuses up to $1 million, and 37% thereafter.
- The aggregate method , where the bonus is combined with regular wages, and taxes are withheld on the total amount according to standard payroll withholding rules.
Bonuses will ultimately be included as part of total income when filing the annual tax return, and any over- or under-withholding is reconciled then.
