See how much of a year-end or holiday bonus you actually keep after the 22% federal supplemental withholding, state tax, Social Security and Medicare – and how to gross up a bonus.
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With bonus amount $2,000, federal withholding 22%, state withholding 5%, 401(k) contribution from bonus 0%, net bonus you want to give $1,000 gross-up:
You keep about $1,307.00 of a $2,000.00 bonus
Withheld: income tax $540.00 · Social Security & Medicare $153.00 · to hand over $1,000.00 net, gross up to $1,530.22
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Income tax withheld = (bonus − 401(k) contribution) × (federal % + state %). Social Security 6.2% + Medicare 1.45% = 7.65% of the whole bonus. Net = bonus − 401(k) − income tax − FICA. Gross-up = net wanted ÷ (1 − 401(k) % − (1 − 401(k) %) × tax % − 7.65%).
Formula source: Percentage method for supplemental wages (IRS Publication 15) plus FICA 7.65%; gross-up = net ÷ (1 − total withholding share). IRS Publication 15 – employer tax guide (supplemental wages) · IRS Publication 15-T – withholding methods · IRS Topic 751 – Social Security 6.2% and Medicare 1.45%
Written and checked by the TanLabs Editorial Team · Last updated
22% federal, 5% state, 7.65% FICA, no 401(k):
| Bonus | Federal 22% + state 5% | FICA 7.65% | You keep | Gross-up to give this amount net |
|---|---|---|---|---|
| $500 | $135.00 | $38.25 | $326.75 | $765.11 |
| $1,000 | $270.00 | $76.50 | $653.50 | $1,530.22 |
| $2,500 | $675.00 | $191.25 | $1,633.75 | $3,825.55 |
| $5,000 | $1,350.00 | $382.50 | $3,267.50 | $7,651.11 |
| $10,000 | $2,700.00 | $765.00 | $6,535.00 | $15,302.22 |
About 35% is withheld in this example, so a $5,000 bonus lands as about $3,250. Withholding is not the final tax – you may get some back, or owe more, when you file.
It is not taxed more – it is withheld differently. Employers often use the flat 22% federal supplemental rate; your real tax is settled on your tax return.
Employers can use the flat 22% or add the bonus to a regular paycheck. Supplemental wages over $1 million in a year are withheld at 37%.
Yes. Social Security and Medicare apply to bonuses like regular wages, up to the yearly Social Security wage base.
Many plans allow it, up to the yearly contribution limit. It lowers federal income tax withheld but not FICA.
Yes. Cash and gift cards from an employer are taxable wages, even small ones.
The employer pays enough extra to cover the taxes, so the employee receives a set net amount.
Sources: IRS Publication 15 – supplemental wages · IRS Publication 15-T – withholding methods