The IRS treats bonuses as "supplemental wages." Under the percentage method, employers withhold a flat 22% for federal income tax on bonuses up to $1 million. For amounts exceeding $1 million, the rate increases to 37%.

This flat rate is a withholding convenience -- it does not mean you actually owe 22% on your bonus. Your true tax liability depends on your total annual income and marginal bracket. At tax filing time, the bonus is added to your regular income, and any over- or under-withholding is reconciled through your refund or balance due.

FICA taxes (Social Security at 6.2% and Medicare at 1.45%) also apply to bonus pay. Social Security tax stops once your combined wages exceed $176,100 for 2026. An additional 0.9% Medicare surtax applies to earnings above $200,000 (single) or $250,000 (married filing jointly).