1. What is Federal Bonus Tax?

The federal bonus tax is a flat 22% tax rate applied to supplemental wages (including bonuses) under $1 million in the United States. This rate is set by the IRS for easier withholding on supplemental income.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( Bonus \) — The bonus amount before taxes
• \( 0.22 \) — The flat 22% tax rate for supplemental wages

Explanation: The IRS mandates a flat 22% withholding rate for supplemental wages under $1 million as of current tax laws.

3. Importance of Bonus Tax Calculation

Details: Understanding bonus taxation helps with financial planning, ensuring proper withholding, and avoiding surprises during tax season.

4. Using the Calculator

Tips: Enter your gross bonus amount (before any taxes or deductions) to calculate the federal tax withholding. The calculator assumes the standard 22% rate for bonuses under $1 million.

5. Frequently Asked Questions (FAQ)

Q1: Is the bonus tax rate always 22%?
A: For bonuses under $1 million, yes. Amounts over $1 million are taxed at 37% for the portion above $1 million.

Q2: Is this the final tax on my bonus?
A: No, this is just the withholding. Your actual tax liability will be calculated when you file your annual return.

Q3: Are state taxes also withheld from bonuses?
A: Yes, most states also withhold taxes from bonuses, but rates vary by state.

Q4: Can my employer use a different withholding method?
A: Employers can optionally use the aggregate method (combining with regular wages), but most use the flat 22% rate for simplicity.

Q5: Are bonuses taxed higher than regular income?
A: Not necessarily - the 22% is just withholding. The actual tax rate depends on your total annual income.