1. What is Payroll Bonus Tax?

Bonus payments are typically taxed differently than regular wages. Employers often withhold taxes from bonuses at a flat rate (supplemental rate) which may be higher than your normal withholding rate.

2. How Does the Calculator Work?

The calculator uses the following formula:

Where:

• \( Bonus \) — The gross bonus amount before taxes
• \( Federal \) — Federal supplemental tax rate (as decimal)
• \( State \) — State supplemental tax rate (as decimal)
• \( Local\_rates \) — Local supplemental tax rate (as decimal)

Explanation: The calculator sums all tax rates and applies them to the bonus amount to determine total withholding.

3. Importance of Bonus Tax Calculation

Details: Understanding how much tax will be withheld from a bonus helps with financial planning and ensures there are no surprises when you receive your paycheck.

4. Using the Calculator

Tips: Enter the gross bonus amount and applicable tax rates as decimals (e.g., 0.22 for 22%). The calculator will show both the total tax and net bonus amount.

5. Frequently Asked Questions (FAQ)

Q1: Why are bonuses taxed differently?
A: The IRS allows two methods for bonus taxation: percentage method (flat 22% federal) or aggregate method (combined with regular wages).

Q2: What is the typical federal bonus tax rate?
A: For 2023, the federal supplemental rate is 22% for bonuses under $1 million, and 37% for amounts over $1 million.

Q3: Do state tax rates vary for bonuses?
A: Yes, some states have special rates for supplemental wages while others tax them as regular income.

Q4: Can I get a refund if too much tax is withheld?
A: Yes, any over-withholding will be refunded when you file your annual tax return.

Q5: Are bonuses subject to Social Security and Medicare taxes?
A: Yes, bonuses are subject to FICA taxes (6.2% for Social Security and 1.45% for Medicare).