How to Calculate Payroll Taxes on a Bonus

Everyone loves a bonus check: It’s free money for doing your job well. However, most employers pay bonuses separately on a check that’s unattached to your regular wages. This is because it’s easier for the accounting and payroll departments to track and record bonus payments when they’re separated from regular wage obligations. The downside of this is that separately reported bonus payments carry a higher flat-rate withholding percentage, which is mandated by the Internal Revenue Service. Before you start planning how you’ll spend your extra cash, calculate the tax on the bonus to avoid any shocking surprises when you get that check.

Calculate the amount of your bonus. In some cases, your employer will let you know the amount before the bonus is issued. In other cases, you’ll at least know what your bonus is based on, such as a percentage of sales.

Multiply the bonus amount by .25. When your bonus is paid separately from your regular pay check, your employer withholds a flat 25 percent from your check for federal income tax.

Multiply your bonus amount by .765. As of publication, this is the combined rate for Social Security and Medicare tax.

Add the results of your federal income and Social Security and Medicare tax calculations and subtract the sum from your bonus amount. The result is your net bonus.


  • There isn't a general special rate for state income taxes on bonus payments. Use the filing status and number of exemptions on the W-4 form you gave to your employer to calculate the state income tax that will be withheld from your bonus. State withholding tables are available on your state's Department of Revenue website.
  • If your employer pays your bonus with a regular paycheck instead of separately, calculate your federal income tax by adding your bonus amount to your regular gross pay. Use your federal W-4 information and IRS Publication 15 to calculate the federal income tax that will be withheld on the sum of your regular pay and bonus income. This publication is available on the website.

About the Author

With a background in taxation and financial consulting, Alia Nikolakopulos has over a decade of experience resolving tax and finance issues. She is an IRS Enrolled Agent and has been a writer for these topics since 2010. Nikolakopulos is pursuing Bachelor of Science in accounting at the Metropolitan State University of Denver.