Bonuses can feel like a well‑earned reward, but in 2025 they will still face special federal withholding rules that can make them look heavily taxed at first glance. Understanding how the 2025 bonus tax rate works helps you predict your take‑home pay and avoid surprises when you file your return the following year.
Bonuses Count as Supplemental Wages in 2025
For tax purposes, most cash bonuses are treated as “supplemental wages,” a category that also includes commissions, overtime, severance, and certain incentive payouts. In 2025, the IRS allows employers to handle supplemental wages differently from standard salary when calculating federal income tax withholding. This does not mean bonuses are taxed at a totally different permanent rate; it only changes how much your employer is required to withhold up front. When you actually file your 2025 return in 2026, the IRS will still apply the regular income tax brackets to your total income, including the bonus.
The Flat 22 Percent Federal Bonus Withholding Rule
The most common way employers will handle bonuses in 2025 is the “percentage method,” often called the flat rate method. Under this rule, if your employer pays your bonus separately from your regular paycheck and clearly labels it as a bonus or supplemental wage, they can withhold a flat 22 percent for federal income tax on that amount. So, if you receive a 5,000 dollar bonus, your employer will typically send 1,100 dollars straight to the IRS, before adding in Social Security, Medicare, and any state or local tax withholding. This flat rate aims to simplify payroll and provide a consistent approach for both employees and employers.
Higher Withholding for Very Large Bonuses
The system changes for very high earners. If your total supplemental wages from the same employer exceed 1 million dollars during the year, federal rules require a higher withholding rate on the excess. In that situation, the first 1 million dollars in supplemental wages is still subject to 22 percent federal income tax withholding, but every dollar above 1 million must have 37 percent withheld. This two‑step structure mirrors the top federal income tax bracket, which remains 37 percent for the highest incomes in 2025. Even so, these are still only withholding instructions; your final tax is decided by your full income picture at filing time.
Typical Federal Bonus Withholding Situations in 2025
| Bonus situation | Federal income tax withholding method in 2025 |
|---|---|
| Separate bonus under 1 million dollars | 22 percent flat federal withholding on the bonus |
| Supplemental wages above 1 million dollars | 22 percent on first 1 million, 37 percent on amounts above that |
| Bonus combined with regular paycheck | Taxed using aggregate method based on normal payroll tax tables |
| Moderate bonus for high‑income taxpayer | Often 22 percent withheld, with true rate settled at tax filing |
The Aggregate Method: When Your Bonus Is Lumped In
Not every employer uses the flat 22 percent method. If your bonus is combined with your regular paycheck and not clearly identified as a separate supplemental payment, your employer may use the “aggregate method.” Under this approach, payroll adds your bonus to that pay period’s normal wages and then calculates withholding as if the total were your usual ongoing pay. Because that combined number is higher than your normal paycheck, the payroll system may temporarily treat you as if you are in a higher bracket, resulting in more than 22 percent being withheld. This can make a bonus feel heavily taxed, even though the excess withholding could come back as a refund at tax time if it overshoots your actual liability.
Other Taxes That Still Apply to Your Bonus
In addition to federal income tax withholding, bonuses remain subject to Social Security and Medicare taxes (FICA) in 2025, just like ordinary wages. The Social Security portion is withheld at 6.2 percent on wages up to the annual wage base limit, and Medicare is withheld at 1.45 percent on all wage income, with an extra 0.9 percent Medicare surtax for high earners above certain thresholds. Most states also tax bonuses, sometimes using their own flat supplemental wage rates and sometimes folding them into normal paycheck calculations. When you add federal income tax, FICA, and state withholding together, it is common to see 30 to 45 percent or more taken out of a bonus on payday, even though your true blended tax rate may end up lower.
Your Real Tax Rate vs. What Is Withheld
One of the biggest myths about bonuses is that they are “taxed at 22 percent” or “punished” with a special higher tax. In reality, the 22 percent figure is just a withholding shortcut. For 2025, your actual federal income tax will still be calculated using the normal marginal brackets that run from 10 percent up to 37 percent, with thresholds adjusted each year for inflation. When you file, the IRS adds your bonus to your salary, interest, and other taxable income, then compares your total tax due with the amount withheld. If too much was withheld from your bonus, you will see the difference as part of your refund; if too little was withheld, you may owe a bit more in April.
Planning Ahead for a 2025 Bonus
Knowing how the 2025 bonus rules work allows you to plan in advance. If you expect a significant bonus, you can ask your HR or payroll team whether they use the flat 22 percent method or the aggregate method and whether you can request extra withholding to avoid a year‑end tax bill. Increasing your retirement plan contributions on a bonus check can also lower your taxable income and funnel more of that one‑time money into long‑term savings. For larger bonuses, or if you are close to moving into a higher bracket, it may be worth speaking with a tax professional about adjusting your withholding or making estimated payments so that your bonus becomes an opportunity, not a tax headache.
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FAQs
Q1: Is my 2025 bonus really taxed at a special 22 percent rate?
No, 22 percent is just a federal withholding rate for many bonuses; your actual tax is based on your overall income and the regular tax brackets.
Q2: Why does so much seem to come out of my bonus check?
Your bonus is subject to federal income tax, Social Security, Medicare, and usually state tax, so combined withholding can easily exceed 30 percent on payday.
Q3: Can I reduce the tax hit on my bonus?
You can often direct part of your bonus into pre‑tax retirement accounts and adjust withholding or estimated payments, but you cannot avoid having it treated as taxable income.
