See how much tax comes out of your bonus and what you actually take home, using the IRS 22% supplemental wage method.
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The IRS treats bonuses as supplemental wages. Employers can withhold federal tax on them in one of two ways:
Either way, Social Security (6.2%), Medicare (1.45%), and any state income tax also apply. Withholding isn't your final tax bill — if too much is withheld, you get it back at tax time.
Why was my bonus taxed at 40%?
It likely felt that high because of the flat 22% federal supplemental rate plus 7.65% FICA and state tax. That is withholding, not your final tax rate — excess is refunded when you file.
Can I avoid tax on my bonus?
You cannot avoid it, but you can reduce taxable income by directing the bonus into a 401(k) or HSA if your employer allows it. Always check with a tax professional.
Is the bonus tax rate really 22%?
For federal withholding under the percentage method, yes — 22% on bonuses up to $1 million in 2026. Your actual tax owed depends on your total annual income.