The 22% Bonus Tax: Why Your Bonus Seems Over-Taxed

There is no special "bonus tax." The 22% rate is a flat withholding estimate that employers use for supplemental wages, not the actual tax rate on your bonus. Your bonus is taxed as ordinary income at your marginal rate, which may be higher or lower than 22%. The difference between what was withheld and what you actually owe is reconciled when you file your 2026 return.

The 22% flat withholding method

When your employer pays a bonus, commission, overtime, or other supplemental wages, the IRS gives them two options for calculating federal income tax withholding. The most common is the flat rate method: withhold22% on supplemental wages up to $1,000,000 in a calendar year.

The 22% rate comes from the third bracket in the 2026single-filer bracket table, which covers taxable income from $50,400 to $105,700. The IRS chose this rate as a reasonable middle-ground estimate for most workers. It is not a separate tax category; it is a withholding convenience.

FICA taxes also apply to your bonus: 6.2% for Social Security (up to the $184,500 wage base) and 1.5% for Medicare (no cap). These are withheld in addition to the 22% income tax withholding.

Flat method vs aggregate method

Employers can choose between two IRS-approved methods:

• Flat method: Withhold 22% on the supplemental amount. Simple and predictable. Most large employers use this.
• Aggregate method: Combine the bonus with your regular pay for that pay period and compute withholding on the total using the standard bracket calculation. Then subtract the withholding that would have applied to your regular pay alone. The difference is the bonus withholding.

The aggregate method often results in higher withholding than the flat method because the combined pay pushes the calculation into a higher bracket for that single pay period. However, since annual tax is based on total annual income, not any single paycheck, the aggregate method can overstate the true tax owed on the bonus.

Why 22% may be too much or too little

The flat 22% withholding rate is just an estimate. It can overshoot or undershoot depending on your actual marginal rate:

• Too much: If your taxable income falls entirely within the10% and 12% brackets (under $66,500 gross for single filers), your actual rate on the bonus is 12% or lower. The22% withholding is more than you owe.
• Too little: If your taxable income is in the24% bracket (above $121,800 gross for single filers) or higher, the bonus is actually taxed above 22%. The flat withholding does not cover the full amount.
• Just right: If your marginal rate is 22%, the flat withholding matches your actual tax on the bonus.

Getting the difference back at filing

Withholding is not a final tax. It is a prepayment. When you file your 2026return, the IRS calculates your actual tax liability on all income (including the bonus) and compares it to what was withheld during the year.

• If total withholding exceeds your liability, you get a refund.
• If total withholding is less than your liability, you owe the difference.

If the flat 22% was too high for your situation, the over-withholding on your bonus is factored into your overall refund. You do not need to take any special action to claim it; the standard filing process handles it automatically.

If you want to avoid over-withholding throughout the year, you can adjust your W-4 after receiving a bonus. Adding a higher deduction on Step 4(b) or reducing extra withholding on Step 4(c) can offset the excess. See How to Adjust Your W-4 Withholding for details.

Above-$1M bonuses

For supplemental wages exceeding $1,000,000 in a calendar year, the IRS requires a different withholding rate: 37%, which is the top marginal rate for 2026. This applies to the portion above $1,000,000, not the entire bonus.

Use the bonus tax calculator to see the withholding on your specific bonus amount. For a full paycheck breakdown, try the paycheck calculator.